Q2 2022 Veeva Systems Inc Earnings Call

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Good day and thank you for standing by welcome to Veeva systems fiscal 'twenty 'twenty, two second quarter results conference call.

All participants are in a listen only mode.

I read 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 Master. A reminder, this conference is being recorded.

I like to hand, the conference to the secret to give the forward looking statements. Thank you.

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Good afternoon, and welcome to vivo fiscal 2022 second quarter earnings conference call for the quarter ended July 31st 2021.

As a reminder, we posted prepared remarks on <unk> Investor Relations website, just after one PM Pacific today.

Hope you've had a chance to read them before the call.

Today's call will be used primarily for Q&A with me today for Q&A are Peter Gassner, Our Chief Executive Officer, Paul shallow EVP commercial strategy on Brent Spellman, our Chief Financial Officer.

During the course of this call we may make forward looking statements regarding trends our strategies and the anticipated before me kept the business. These forward looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. Our actual results may differ materially. Please.

Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q.

Forward looking statements made during the call are being made as of today September one 2021 based on the facts available to US today. If this call is replayed or viewed after today. The information presented during the call may not contain current or accurate information.

<unk> disclaims any obligation to update or revise any forward looking statements on the call. We may also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release and in the supplemental investor presentation, both of which are available on our website with that.

You for joining us and I'll turn the call over to Peter.

Okay.

Thank you Arturo and welcome to the call everyone.

It was another great quarter for vivo with strength across the business.

Total revenue was up 29% to 456 million subscription revenue was also up 29% to $366.

Non-GAAP operating income was $192 million or 42% of total revenue.

As noted in my prepared remarks, we did well in our established areas, but also had major progress in our newer areas, including safety C. D. M S digital trials link and data cloud.

At this point I'd like to open up the call to questions for Brent Paul or myself.

And ladies and gentlemen, if you would like to ask a question. Please press star and the number one on your telephone again, if you'd like to ask a question press star one on your telephone.

Yeah.

Forever first question do we have Richie Deloria from RBC Ritchie Your line is open.

Wonderful. Thanks, so much for taking my questions and nice to see some acceleration in the business.

Wanted to Peter.

Your prepared remarks, you talked a little bit about how Ah theres, some shrinking footprint deployments at some of the AR on the CRM side can you maybe talk about how long you expect this headwind. The last you know in terms of shrinking before it starts to stabilize.

And alongside that you you talked a little bit about it but commercial cloud growth still accelerated in the quarter, which is really nice to see in spite of these headwinds can you can you maybe talk about what is driving that and you know maybe offsetting the striking footprints and particularly what you're most excited about within commercial cloud and you know what you think is kind of a.

Our sustainable growth rate for this business and I've got a follow up on the CD side.

Yeah I'll take that thanks. Appreciate this is Paul yeah. So just to give you give you a little bit of color. If you remember back.

Really to work I think it was Q3 of last year, we started talking about the idea that we were helping to make the industry more efficient we were helping the industry move to digital and as we did that.

In an accelerated fashion, they would realize the productivity and the efficiency gains are doing that and there would there would likely be some reductions.

Coinciding with that.

We haven't seen them up until actually this quarter. So we started seeing some of the first a reduction from a small number of our enterprise customers.

<unk> had some reductions that were a little bit out of the out of the ordinary. So we just started seeing it this quarter I expect we'll continue to see it through the second half of this year and also into a into next year.

We do expect that will offset those reductions as we have this quarter with strength really broadly across commercial cloud and we're going to continue to gain share in CRM. We gained share in CRM this quarter and I expect we'll continue to do that over time, and then we'll see strength in the add ons.

Some of the newer products that you heard Peter talking about particularly in the data space like link weighing had a particularly strong quarter announced are progressing really well cross six will be a contributor and then over the long term, we will see more contribution from from Datacom. So a lot to be excited about going forward.

Our our wonderful that that's really helpful. And then on the <unk> side, and maybe you want to expand and talk a little bit about your success in partnering with C. R hours, because if we rewind the clock back a couple of years. There were there were definitely investor concerns that you now see our hours, where we're going to be a little bit of a headwind to vivo over time and in.

Clearly hasn't turned out to be that way and you know now you're talking about the traction you're seeing on CRM partner program.

And how that relates to C. D. M. S. Can you talk a little bit about your strategy would see arrows, particularly as it relates to the C. D M S side.

And how you've been able to gain that momentum with that as a channel. Thanks.

I'll take that one this is Peter yes, heroes will be especially important partner for C. D. M S. Because when that when the C. D. M. S becomes a part of their tech stack that they can offer to their customers and it's really inefficient channel. So how are we gaining traction there I would say number one by actually product.

Excellence, creating a better truly cloud C D mass product that integrated in with the other veeva products. So as that has happened.

The sponsors they'll start asking the C. D. M. S. D C. CRO, sorry, they'll start asking the CRM was about that Hey are you offering Veeva you know maybe you should be offering vivo, we're using veeva and then.

Zero as they start to get to know more about visa and then they started offering veeva is the first experimentally as it as it has.

Product.

If a sponsor would wanted and then as they start to like it and see the efficiencies then they start to make it their standard. So it's really about customer success for the Sia ROE that's about having an excellent product, but also having a great partner program and providing them the support that they need.

Alright wonderful thank you so much.

Yeah.

For our next question, we have Brian Peterson from Raymond James Bryan Your line's open.

Thanks for taking my question. So maybe just a follow up on Rich's question, but.

I'm just curious on that.

Timing of some of the sales rep trends for some of your customers like how did that trend versus your expectation and how pervasive is that I guess I'm trying to think about where that impact is going to come in and then how to think about what that could be maybe fiscal year 'twenty three and beyond.

Yeah. So.

You know in terms of timing, we talked about it as happening over.

The one to two years, it's not an exact science and we see a lot of our customers really thinking about that.

The industry Hasnt hit in a new steady state so.

If you remember the industry was largely face to face and now there was a massive shift to digital and things are still in flux a lot of things are changing with access to offices as the pandemic kind of continues and lingers on so if you're a life Sciences company don't Wanna Overcorrected in one direction or the other too quickly. So that's why you're seeing.

A lot of this just just take some time for companies to be a little bit thoughtful about whats the right size of the field salesforce, but in general on average we do see we are seeing our customers getting the benefit of becoming more digital I think that trend is here to stay that will happen over the long term and I think.

They'll take these reductions over the next still over the next one to two years.

So I think that time frame and I think once we kind of hit a new steady state I don't anticipate it changing much beyond that so you know these are always reductions that we thought would happen as the industry became more efficient and we're just seeing them a little bit faster than we had anticipated.

And Paul what would be like if you're thinking about the total investments that youre going to make right you could think about the efficiencies they're gonna game maybe from.

Attacking something but lower head count, but there's a lot of opportunity to take some of those dollars and redeploy. It says what is some of the customers may be learned or how are they thinking about.

Attacking the opportunity with more of a digital motion.

Yeah, you're exactly right. It's the right way to think about it so as we make let's say as we're able to make an individual company, let's say 10, or 15 or 20% more productive because they're able to mix more digital and because they are able to accomplish more they have the option right. They have the option to reduce the.

The size by that same amount what do they have the option to take some of those games and apply them just to reaching more customers. So that is the calculus and so those are the kinds of discussions that we have with our customers all the time.

Our strategy teams our business consulting teams in terms of what's the right mix the right mix of digital and field force engagement and we're in active discussions with many of our customers on those kinds of things.

And I think it'll be a mix for most customers. They will not take all of the productivity gains as reductions so it'll be a bit of mixed based on geography, and therapeutic area and the specific needs of each business.

Thank you.

For our next question, we have Brent bracelet from Piper Sandler Brent Your line is open.

Thank you and good afternoon, I guess, one for Peter and one for Brian If I could Peters safety really stood out this quarter I think with your first top 20 win.

Do you think about that win is as one of the early adopters I mean, it seems like safety is happening here, maybe a little faster than I would've anticipated and just wondering if is that when with the first half 'twenty is just an early adopter or are you seeing a stronger interest and appetite to rollout that safety vault suite of.

Products and then again, one quick follow up for Brent.

It's we do have early adopters you know, we have a number of customers, but smaller and when we have divisions of some large customers. But this was the first one to go all in with US. The first top 20 to go all in with Us for safety.

Never know when that's going to happen the timing has to be right from the customer's perspective, they have to have a real need to want to go early they have to have a real need and our product has to be ready and the stars have to align I I thought it would happen sometime in the next sometime this.

This year or early next year and it happened so it happened a bit quicker than I thought, but we would never take a deal like that before we were ready we would turn down a deal like that if we werent ready.

So it happens just at the right time with just the right customer.

And it is going to be a positive, but I don't see it as a.

I see there was a turning point for veeva, but it's not going to be a turning point in revenue and adoption that still happens on its on its normal normal life cycles, you'll really see the impact of this deal and the fall through on this deal honestly, it's 2323 years down the road that's when it really starts moving the market you saw.

This with CD MFS. This was maybe a year and a half or so ago, when we announced our first enterprise top 20 for CDMA.

And now what you're seeing is the echoes that follow through and in our private CDN mis adoption.

Super helpful color, there and then I guess, Brent for you referenced kind of a tight labor market I think that's being referenced quite a bit.

Just trying to think through the 5% salary increase never really done this before but as you think about that is that.

Tied to.

A proactive view to kind of stem churn was it reactive just trying to think about that 5% salary increase, particularly as it relates to I think workday last week also.

We're shifting some some some dollars out of stock based comp to cash and just didn't know if there was a broader trend happening in the bay area or not but could you talk a little bit about that 5% salary increase in.

Is that proactive reactive just trying to understand the logic, there and timing.

Yeah, I mean this is a proactive.

We're doing the right thing by our employee base and we're in unusual times a bit with inflationary in and a very competitive environment. So we took a look at that.

And we thought the timing was right and to.

To make this investment in our people so that's effective as of today.

And Brent I would I would add.

We're pretty international as a company. So we have a high percentage of them.

Almost half of our people outside the U S than inside the U S. Our concentration is not really in the Bay area right. We have development centers multiple development centers Toronto.

Boston Raleigh, and lot of our field people on the east coast, So not having to do with the bay area per se.

As Brent mentioned.

Proactive and broad based.

Helpful color. Thank you.

For our next question, we have Ken Wong from Gagan Securities.

Ken Your line is open.

Tastic.

Just a follow up on that.

So I think we you quantified 10 million impact on an EBIT for the for the year. Just wondering how we should think about any potential impact on maybe the services revenues should we generally just kind of a bump up our services run rate that we're modeling any thoughts on that Brent and then a follow up for Peter.

Yeah, I mean I just.

Yes.

Dominic will impact there on the on our services revenue from that perspective, I mean, it's something that is normal course of business that we do flow that through on the services side, but nothing significant.

Warrants a change in your model.

Got it got it and then I guess another kind of follow on on that on that vein I think I read in the script there Peter that you've mentioned not raising prices for software data at this time and you guys have never raised prices in your history. So just wondering if that's something that you're contemplating with with as you mentioned inflation salary bump.

That's something that might be in consideration down the line.

Oh, that's a good question. Our philosophy has always been you know get the right price for our product and try not to increase the prices of our subscriptions. We haven't increased some because customers generally don't like it and we tried to get efficient and deliver more and more value.

And we like to maintain doing that and we think we can now could we do that forever you know that depends on how many years out in the future and what inflation does but certainly for the foreseeable future, we don't anticipate raising our prices for our subscriptions.

Great. Thanks, a lot you too.

Yeah.

Yes.

For every next question, we have Stephanie Davis from <unk>.

Stephen Your line is open.

Thank you guys for taking my questions congrats on the quarter.

I was hoping you could give us some broader directional views on your additional trials, especially in light of the Delta there.

Cause the macro backdrop is all in the faster pace of adoption and does that impact your investment speed or priorities in light of that.

Okay. Thanks, Stephanie I'll I'll take that so digital trials is really about all types of trials and not really related to COVID-19 or the.

Are the adult or the Delta variant.

It's about making the trials faster.

And less expensive. So we have a target of 25% faster, 25% less expensive and how we're going to do that is have it be.

Really patient centric.

And really paperless. So you might hear about something you know the category called decentralized clinical trials, there's a lot of talk about that.

That's an area where it is in two but were taking a broader broader approach overall digitizing the whole clinical trials starting from the sponsor side the clinical data management clinical operations to the clinical research side, and then right out to the patient. So that's how we think about it Stephanie really broad and very.

Long term.

And then they are high you have to ask the flip side of the sales Rep head count reduction question, but you've been beating margins healthily. Despite these kind of when you see over the past few quarters.

What's been driving this outpaced margin expansion and how sustainable is that.

Yeah, Hi, Stephanie.

Regarding the margin I mean, there's a few things that drove the outperformance.

One is that this topline subscription because it's flowing through and there is some lumpiness lumpiness on the timing of our new data suppliers. We had one that we thought would close in Q2 and it actually closed in August.

So that that is some timing that played in and that's factored into our guidance going forward and then timing of hiring we hired 236 net employees in the quarter and where it was slightly behind plan and.

We're looking to catch up in the back half of the year as well, so I'll kind of cut.

It's got contemplated into the beat in the quarter and then kind of how you think about the guide for the balance of the year.

All right helpful. Thank you yes.

Thank you.

For next question, we have made in Becker from William Blair. Your line is open.

Yeah.

Questions here I guess, maybe first one from a higher level for Peter you touched on kind of in the in the prepared remarks, but thinking about again kind of your your partnership approach with with not only your business consulting segment, but as well as kind of what's the Cro's I guess love to understand how you guys are thinking of visa as Vic.

So not only kind of drive that adoption of the existing platform, but also kind of as as drivers of your innovation efforts over time are you you've talked a lot about kind of the strategic partnership approach but.

We'd love to kind of understand how you are kind of viewing this to drive that innovation roadmap.

Yes. It is that's excellent question I'll take this heroes first.

We are partnering Tony with this heroes to serve our customers to two levers as heroes is a channel but also we can get very direct feedback from the zeros and we've done that included in this euro is more as part of our design process, having talking directly to our product teams.

And just get that tight feedback loop going we've put up some great effort on that and it's paying off.

Now a business consulting that's a little bit different. These are our consultants are billable consultants that are doing business process work with our customers. So there also we have a tight feedback because as our customers on the business side or are talking with our business process consultants about the process changes.

They would like to make or the change management, they would like to do that sometimes translating into requirements into our product or ideas into our product.

So I would say it's been a great addition to Veeva this business consulting and it is impacting our product roadmap for the better.

Okay.

Excellent to hear and then maybe one for Paul.

And I think we've touched on this in the past too, but we've talked about the payments integration kind of into <unk>, a nice kind of extension of the platform given that unified approach to to the clinical suite, but I'd love to understand how you guys are thinking about that payments opportunity more broadly.

<unk> ability to expand use cases, and then how are you guys seeing that from an initial adoption perspective, given that our cts in its own right, it's kind of still relatively early.

I have an offering for the platform. Thank you guys.

Yeah, Peter I'll take the payments one payments as it relates to our clinical operations, you're right that it's going well, but it's early because payments requires our cts product <unk> is still relatively early in our lifecycle.

So the idea behind payments is to automate the payments through the clinical research sites based on the activities done and that's where it's you know, especially useful for the customer to get their clinical operations and their clinical data management from Veeva, because the clinical data management that creates the active.

<unk> and it gets passed over into the clinical operations and then the payment is sent out automatically.

And that's the value that the whole suite provides so payments is going well, but still very early.

Great. Thank you guys for taking the questions.

For our next question we have card curious did from UBS. Your line is open.

Hey, Brent So Brent Veeva beat this quarter on both revenue and billings, but relative to the last three or four quarters, where you put up 4% to 6% beats on reps and 7% to 10% beats on billings. This quarter was a little skinnier and I'm wondering what what changed to create that result relative to your.

Or expectations. Thanks.

Yeah, Hi, Karl yes, so.

We did as you said, we did beat our guide.

We're very pleased with the 29% year on year growth.

Commercial cloud at 22% in vault at 37%. So we are very happy with how we executed an area.

To call out is on the services side.

We did talk about last quarter that we were running at a very high utilization rate and then we expected that to normalize a bit and that definitely happened.

In the quarter on top of that what we saw was an increase amount of PTO not only on the on the VEBA delivery side, but also our customers. Some services came in within our guide, but on the lower end, but all in all we're very happy with the demand picture that we saw for the quarter.

Thank you Brent and then if I could just ask you a margin question.

You indicated that the salary increase.

It will occur over five months of this fiscal year. So if we annualize that should we think about the impact on next year's margins.

All else equal being a roughly $25 million.

Impact and then I guess, if we layer that into our models and assume a.

Reversal, if you'd like of the Covid savings that you're experiencing this year it feels like the the the more likely prospect is for margins to be down next year. As a result of these two things is that at least directionally the correct approach Brent.

Yeah, I'm not going to provide a guide on margins for next year, but what I can say is youre right in your rough sizing, it's about $2 million a month.

Related to the 5% increase.

And then time will tell on our car travel.

And the van <unk>.

Savings that we see you know we have a 200 basis points.

In our margin this year.

Over time, some of that will come back into play and time will tell.

Okay. Thanks for that color I appreciate it.

Thanks Carl.

For the next question we have Sterling.

From Jpmorgan Sterling your line is open.

Thanks, guys. This is Jackson ader on for Sterling Tonight.

First question is on the strength in the SMB, what you saw on the commercial cloud.

How should we be thinking about kind of the direction here of strength in SMB versus the headwinds on the enterprise side for the for the Rep counts is there any worry about that.

The strength of Nielsen be might ease its way into the same territory, we're seeing in the enterprise.

Yeah, Hey, Jack this is Paul so yeah, you're right we have.

Continuing to see really good strength in the SMB SMB.

The new companies in SMB it tend to be pre commercial companies companies that are launching our first medicine.

And we're winning the vast majority of those are you heard US talk about this concept of commercial cloud accelerator, where we're helping customers in a sense go all in on a broad set of Veeva products and services.

Our upfront all at once so one thing we're seeing is the.

The size of the deals with these customers, where we're seeing kind of a longer term emotional commitment and broader size and strength.

We're also seeing that where we're consistently winning the vast majority of them. So SMB is driving a lot of strength and is driving also a lot of future opportunity. If many of these companies will will grow and expand into bigger companies over time.

In terms of will they look like in enterprise in terms of Rep reductions some will and maybe for different reasons as you know.

Kind of there.

Their market position and what happens with their medicine in the marketplace and whether they continue to have great traction in the market or not but I think in general the reductions that we have been seeing have largely been on the enterprise sectors. There establish sales forces the SMB will scale.

Over time to the rightsize, whereas an established company may have to do some adjustments as they become more productive so I think it'll be different than the enterprise side.

Yeah, Okay that makes sense and then a quick follow up on that the second <unk> deal with a top 20 pharma.

Just any additional color you can give us to have this comparison first is it a broader implementation.

Isn't the standard standardizing the trials on the visa platform any additional color would be great. Thank you.

Yeah on that second this is Peter on the second C. D M S win.

Different company than the first but similar needs and similar approach similar rollout approach.

They really need to.

Modernize their their environment.

They had a fireman.

Client that wasn't modern and it was fractured with a lot of point solutions.

And it just started slowing them down over time and they realize they need to really re plumb the thing so they piloted.

A few studies to kind of.

Both to test it out but to change their internal processes, because when you move to Veeva for C. D S.

For example, it's an agile clinical study building environment, it's not a waterfall environment, it's agile cloud based environment. So there's a lot of change management to happen.

But but now they're starting to put all their studies on Veeva, so very similar to the to the previous one.

Great. Thank you.

Thanks.

Our next question, we have Donald Hooker from Keybanc capital markets.

Yes.

Great Good evening.

I just wanted to kind of follow up on the pharma sales reps pressures I'm one of the year I didn't think I heard.

But love to hear just kind of a large pharma thing or or kind of maybe a little bit more clarity, where youre seeing the sales pharma sales rep pressure in and is there a possible is there a possible explanation here that that pharma is outsourcing more sales reps.

Sort of using third parties like <unk> and other CSO that the shared service that could result from that pressure.

Yeah.

It does tend to be a little more heavily weighted towards the larger the enterprise companies again companies that have established sales forces across diverse portfolio many of them being larger salesforce is where they established for the more traditional primary care model. So thank you no more traditional medicines, where they have to reach.

Volumes of primary care physicians, they have larger shelf wishes.

Tend to be the first place, where we will start to see some reductions.

Cause those field forces may have been been sized for a different time and a different era, where there was less digital and now as we move into more digital they have the opportunity to start to achieve.

Achieve some of those some of those reductions so I think primarily it will be in the enterprise again, you will see some right sizing in smaller and mid sized companies.

So that.

The primary driver is kind of right sizing and taking productivity and efficiency gains and being able to acquire them.

So they have the right mix in terms of their go to market.

And then in terms of the contract sales organizations.

I think we've seen a major trend there now that's going to vary a little bit by region by region, but we haven't seen a major trend towards outsourcing at this time.

Okay, and then maybe just as a follow up maybe kind of a higher level kind of a little bit of a random question, but would love to hear your perspective do you have any on.

Sort of a commercial IRB space I guess, we saw our recent S. One filing by.

A large study CD clinical large our IRB and I know you have relationships in that area.

With some of it some of the bigger ones and would love to hear your perspective as to whether this could be a growth vertical for vivo going forward or how are you sort of think about that space.

Growth market, either organically or inorganically or through partnership.

I haven't heard you talk about that in the past.

Alright.

These are organizations, they're centralized arby's and localize arby's to review the ethics of our clinical trial before the clinical trial starts. So that's a very important function.

That's an area, where we don't provide those types of services and also we don't provide software to those they need a pretty specialized software. We don't that's an area, where we don't where we don't play at this time as to what we would do going forward. We're always looking for places where we could add value. We don't have any specific concrete product.

Plans in the IRB area at this time.

Okay. Thank you.

Sure.

Yeah.

Yeah.

Yeah.

Our next question, we have Brad Thomas from <unk> Securities. Your line is open.

Oh, Great Hey, guys. Thanks for taking my questions congratulations on that.

Nice quarter here certainly for vault.

And I wanted to ask about.

About that a little bit.

The regulatory one business some sounds like you've had a couple of good deals. There could you just could you provide a little bit of color on this top five CPG.

Deal was this a new customer or was it an existing customer adding adding.

Another department and then just more broadly kind of where are we within CPG that seems to be the industry, where you have seen you saw early traction and we continue to see some good results there.

Is it just a.

An opportunity here to win more new business, there or is it largely an expansion opportunity within some of these bigger accounts that you already have thank you.

I would say it's both it's there are more large CPG, there's a few that we arent in.

We probably in some form or another.

You know maybe almost half of them are the large ones I guess, maybe at least a third between a third and a half of a large ones. But then it's so theres some more to get brand new logos, but then its expanse expansion because theyre very divisional and how they operate so the when we had that was a regional division actually have a large.

CPG company and they went with us because of our success that they had in another division that's generally how it up how it operates in CPG very very large very distributed companies.

Thanks, Peter one more if I may please just on quality and regulatory.

They continue to.

Remained strong here. These had been a couple that had been very early drivers of growth with vault <unk> seen some real success. There early on and it continues to be an enduring driver where are we in terms of industry adoption of those of those offerings is it just the categories in general. Thank you so much.

Yeah, I would say we're.

Early still early.

We're early in regulatory just because these are these are heavy systems to implement end to end to adopt and then quite early and quality because the suite has been expanding a lot in quality, we started out with a product called quality docs and we added to a master of quality management system, then we added training.

We recently bought a company called learned about T. M. P for actually training content and we have more product plans underway in the quality area so quality.

I think if you look when you look out towards for example, 2030 people will be surprised that how big our quality businesses.

Still look quite early.

Thanks Peter.

Yes.

For the next question, we have mezzanine from Evercore. Your line is open.

Okay. Thanks, very much Paul I was wondering can you just give us a sense on.

These customers that took down sales.

Reps you have they already been talking to you about products like engage in I guess, meaning are you, helping them actually become more efficient from a rep perspective already or is that something that happens and then you go back in and help them sort of retroactively deal with it and then I just have one follow up on on the commercial side as well.

Yes, so I mean, all of the ones that we saw reductions I don't know it was a handful in the enterprise they have all been engage customers and they all.

I think most of them are even early pre pandemic, where they started at some level of adoption of engage and then when the pandemic hit they really scaled up so.

So yes every one of them have been actively using and I would say even broader than engage where are the full kind of full suite of many of our digital products, including E. Mail. So they were full on kind of that face to face have to have these digital channels turn on and again it. They don't you don't want to over correct.

This kind of market it takes them a little bit of time to want to realize in those games, but also to make.

To make sure they're they're optimizing for the long term.

So yeah.

Yeah.

<unk>.

Long long time customers of engage and truly taken some of those productivity gains.

Helpful. And then my second question, which is.

When you start thinking about the commercial cloud and all of our products and data that you are bringing to the to the floor for your clients are you moving away from per seat pricing, meaning does at some point in time. These discussions have to become more about outcomes versus just seats and I was kind of curious where you see that going because to a certain degree.

If you're making them more efficient, yes, they should be hopefully theyre growing with you on a net basis anyways I am sure. They are in many cases, but I was just kind of curious if youre kind of getting away from having more proceed.

<unk> versus kind of outcome space discussions and whatever kind of nomenclature that might mean from a pricing perspective. Thanks.

Yes, it's a good one and certainly as the commercial cloud portfolio has expanded and particularly as we've added data products.

And you know data combined with software also services the pursuit model doesn't necessarily fit those kinds of products. So we've already seen that shift happening over the last couple of years, where.

More and more of our revenue was coming from things like our Elas.

Most of our data products, our enterprise license agreements with customers. So we're naturally seeing that shift away from.

Proceed to something like any L. A we haven't yet gone to the idea of outcomes yet.

You know, we're always trying to we're always very thoughtful of is we introduce a new product in the marketplace. What is the right pricing model, what's the right licensing model for for vivo, but also in particular for our customers. We're happy to innovate in that area and we have innovated in a number of places in commercial and how they consume how they buy so yes, that's true.

As already started happening.

Yeah.

For the next question, we have Joe <unk> from Baird. Joe Your line is open.

I wanted to go back to vault safety and I'm curious does the application and the criticality of carry his influence other spending decisions that a customer I guess, what I'm wondering is that once vault safety is established.

Perhaps more prone to being paired with let's say the rest of development cloud and comms for instance.

Yeah, that's a great question.

It's certainly very serious application because safety.

<unk> pharmaceutical company doesn't have the right controls and safety area.

Can actually lose their license to operate the whole company. So it's a very serious one.

When a customer has our safety system.

It's a net positive and with somewhat help us getting getting other products because they would benefit from the integration with safety.

And Wow, if youre trusting vivo for your safety system in the cloud.

Youre pretty likely to trusted and you're having a good experience.

Pretty likely to trust us.

Other areas. So it's excellent question. If you step back. This is what we set out to do roughly 10 years ago. We started thinking about the development cloud and this is what we had in mind that we would have a suite of these applications for the drug development from safety quality clinical and regulatory.

And that they would all fit together and they would work for small companies in big companies and become the way that like the life Sciences industry does drug development.

And so that it's happening it's happening in every one we get in helps every other one.

That's great and then you referenced that a few questions I guess I know it was a small acquisition, but and learning management.

I'm wondering is is training, becoming a more important consideration when do you kind of equate this to some of the.

Developments like realizing business consulting could ultimately be it in road.

Bigger things, but a better relationship with your accounts is training proving to be that for maybe the quality suites or a broader set of applications.

There are multiple types of training and this is true for for what we have here about learn about GMP. That's for compliance related training good manufacturing processes. So that's really related to our quality docs product and the way to think that about that it's sort of like Oh.

Peanut butter and jelly peanut butter is good but if you get it with the jelly you get you know it's easier because our our quality docs is about the training software cannot be accessible.

Do you have the right rules and responsibilities as somebody overdue on their training cannot inspect or look at the records is it validated doesn't work in all your languages all of those types of things, but then by being able to come to.

To vivo and say, but actually need the training content.

In the clinical area for this type of a certain.

Area, what is the micro training that I can use to refresh my employees.

In Poland, and Spanish speaking countries.

If you can get all that from vivo with good customer service because that's what the customers are looking for a strategic partner because they don't really want to focus on that and build that themselves that they don't have to because they have other things they want to focus on.

Thank you.

Okay.

And now for every last question, we have Ryan Macdonald from Needham Company Ryan Your line is open.

Hi, Thanks for taking my questions and congrats on a great quarter.

Continue to be impressed by the number of new logos in core CRM I think 'twenty, one in the quarter up quarter over quarter as well, but just love to know sort of beyond the preclinical success that you're having like how the competitive environment walks in and the mix of maybe competitive replacements in that number this quarter and how you sort of see that pipeline.

Looking moving forward. Thanks.

Yes, that's a good question.

Of the 21 will dissect that a little bit first many of them are from the U S market are those wins and a lot of them are pre commercial companies a handful from from Europe, and then even domestic companies.

In markets like Japan, as an example, domestics that may have a local solution. So some of these are there first.

First CRM system, and so we're not really replacing anything and then others are competitive wins, while we did have a we did have an oce IQ boc conversion. This quarter was a biotech our specialty pharmaceutical company in the U S market. There is there is more we are.

Hearing more.

Cerner frustration by a lot of ITV customers so were.

We're gaining traction in but certainly one was the direct conversion, but the vast majority or a lot of companies that didn't have anything in place already overall the competitive landscape is shaping January shaping up really well.

Lays out in our numbers with the market share gains that we havent CRM the wins that we're having now that we've talked about 21 of those.

And we've been gaining traction with enterprise customers, So really happy with how the competitive landscape is shaping up.

Excellent thanks for taking my questions.

You don't have any further questions at this time.

I'll now turn the call over to the management for closing remarks.

Thank you everyone for joining the call today and thank you to our customers for their continued partnership and to the Veeva team for their outstanding work in the quarter. Thank you.

And ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.

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