Q3 2022 Veeva Systems Inc Earnings Call
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Good day, and thank you for standing by the Walton.
Our system in fiscal 'twenty third quarter 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 this session you will need to press star one on your telephone.
Any further assistance. Please press star Zero I would now like to hand, the countries I'm afraid you agile Garrett senior director of Investor Relations. Please go ahead.
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Good afternoon, and welcome to Viva is fiscal 2022 third quarter earnings conference call for the quarter ended October 31, 2021, as a reminder, we posted prepared remarks on <unk> Investor Relations website, just after one P. M Pacific today, we hope you've had a chance to read them before the call.
As Carl 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 and Brent Bowman, our Chief Financial Officer during.
During the course of this call we may make forward looking statements regarding trends our strategies and the anticipated performance of 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 the most recent filing on Form 10-Q.
Forward looking statements are made during the call are being made as of today December one 2021 based on the facts available to us today.
If this call is replayed reviewed after today the information presented during the call may not contain current or accurate information Viva.
<unk> disclaims any obligation to update or revise any forward looking statements.
May discuss our guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.
On the call. We 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 thank you for joining us and I'll turn the call over to Peter.
Okay.
Thank you <unk> and welcome to the call everyone.
It was another great quarter for Viva with strength across the business and results above our guidance.
<unk> revenue was up 26% a 476 million subscription revenue was also up 26% to 381 million.
Non-GAAP operating income was 199 million or 42% of total revenue.
As noted in my prepared remarks, we had a very good quarter in commercial with particular strength in core CRM Cross X analytics and Viva link in.
In the R&D area, we saw continued strength across the board and EBIT development cloud.
Well now open the call up for your questions.
As a reminder, if he would like to ask a question at this time you will need to press Star then the number one on your telephone to withdraw my question breast upon key.
Your first question comes from the line of Stan <unk> with Morgan Stanley.
Yeah.
Hey, guys.
Good afternoon, and thank you so much for taking my questions, maybe just starting high level.
In the quarter.
What did you see as far as.
Any shifts in buying patterns and I know you called out in the prepared remarks is that I think an incremental $2 million headwind to billings in the quarter is there anything more to call out one time that happened in the quarter.
Oh, Hey, Stan it's Brent DAU in the quarter, we're very pleased overall with the broad based strength, we saw in the business.
The one anomaly that I called out was we expected about a $14 million of one time items. The billings came in at 16, but other than that nothing else I'm happy with the overall momentum and strength of the business.
Got it got it and then as far as the the way we should be thinking about guidance for up for Q4 any other shifts you note other than I think you mentioned the incremental $10 million.
Al.
There's a shift from a renewal.
We're gonna be pulling pushing out into Q1.
<unk> Q4, or anything else that we need to be mindful of as far as that quarter any kind of underlying demand trends or anything else.
So in addition to the items you called out so again work.
Very pleased with the broad based strength a couple of items.
Just to be mindful of is that the ACB bookings linearity.
Was benefit works the first half's in that second half was if you remember we had our strongest.
Bookings quarters in Q4, 'twenty one in Q1 'twenty two so that has an impact.
In addition, the CRM attrition is starting to flow through as we expect and that does have an impact on.
On revenue as well so those are the things I'd be mindful of but all in all.
We've never been happy with our competitive positioning and how we look at the opportunity ahead.
Yeah.
Got it. Thank you so much guys.
Your next question comes from Dylan Becker with William Blair.
Hey, guys nice job on the quarter and I. Appreciate you taking our questions here I guess, maybe starting with Paul on the commercial side.
So nice to see some additional wins with early adopters on data cloud.
But I wanted to maybe dig in into the value with some of the releases coming up here next year with prescribers.
Prescriber and sales data to really kind of tighten that feedback loop.
Are these pharmaceutical company.
And I guess, maybe just kind of that seems like a key driver of value here, but would love to kind of understand how you guys are thinking about this opportunity for those three components and data sets to really come together in data cloud as we think about 'twenty two and beyond.
Yes, Thanks, John for the question, yes, so you're right overall with data cloud, we're really excited about the potential that we have really significant market big market, where we.
We have patient data, which is available today in the U S market and as you referenced we're going to have prescriber data in Q1 of next year and sales data in Q2 of next year. So we're excited to expand that portfolio. When we do that what that allows us to do is to be where we could be that sole provider for for a while.
Sciences company further vast majority of their data and that's where we're approaching.
Today, we have patient data, which is highly differentiated we have a number of early customers who are proving out the value proposition of patient day of Viva is patient data in the market you are finding more patients. We're finding more targets data is more robust in many cases than what exists in the marketplace. So our hypothesis has always been we can <unk>.
Right, a better data set and we're proving that out in the market. So we're super excited about where we're going with data cloud.
Okay, Great. That's helpful. And then maybe one for Peter as well. So we've seen a lot of kind of recent innovation across the quality as well and I think you've kind of highlighted it on that on the analyst day about a month ago around that kind of broader opportunity set.
So I guess, maybe the potential to kind of dig into that.
Applicability here expanding again outside of potentially life sciences vertical maybe something again that shakes out more around that kind of 2025 timeframe, but thinking of how you guys are viewing kind of the innovation cadence.
Quality and the long term opportunity of that Sweden itself.
Yes quality, we're very excited about is turning out to be a very broad business for us. So we added product surveillance actually that was a year or so ago that specific to med tech now, adding validation and QC labs for automation automating the quality control laboratories. So.
It's pretty pretty broad.
And it has some products that are quite mature mature and doing well in the market quality docs and even <unk> now we've had for a long time and then QC lens, which is also a really big new products and we're just building that one so it has a combination of.
Products that are mature and products that are just she is brand new and that's targeted at at life Sciences, but quality is one of those products that goes outside a little bit service providers to two life Sciences, it's contract manufacturers et cetera, CRO. So lots of people need our quality suite can be.
Big business for US that's for sure.
Great. Thank you guys for taking the question.
Your next question comes from Ken Wong with Guggenheim Securities.
Great. Thanks for taking my question a couple of CRM questions for me. The first one I think I saw on the script that you guys mentioned.
Introducing a med tech CRM.
Is this a greenfield opportunity for you guys or was this just just mildly additive by providing existing customers with the with the new experience, what's the right way to think about that particular product.
Yes, Ken It is it's a new opportunity for US today, we sell veeva CRM for pharma into the pharma and biotech industry and Thats built on Salesforce Dot com, the salesforce platform, and that's going well and none of that changes. So you can think of the pharma side as you know we're going to continue to execute as we have been.
And what we announced differently was really for the Med Tech space. So think of Med Tech as this could be anything from a company that sells on a heavy medical equipment, all the way down the surgical gloves. So it's a broad broad industry and it's a bit of a different area for veeva CRM, we've been selling to med tech.
For the past couple of years, primarily our vault R&D applications, and we're doing really well wherever over 100 customers, where we sell to R&D. That's that's the big opportunity in Med Tech is really the R&D space, but what we're doing in CRM is we're creating an industry specific applications for med Tech we're building our industry cloud for <unk>.
It is it's new and additive.
Yes.
Got it Super helpful. And then I also couldn't help but notice that there was a mention of a top 20 enterprise customer I guess my understanding was you guys had pretty much locked up everyone except.
For Roche and I would call. Matt you said it was a bounty on that last enterprise Domino I guess should we think that you converted data or is this just some some derivative of another enterprise customer that from a regional perspective, what's the what's the what's the happening zac.
Yes.
This is one we're proud of it.
Yeah, I won't give I won't comment on specific customers, but I will say that we do have all top 20 somewhere at least somewhere in the globe at this point all the major markets. So we're really proud of this way and this is one that you know these things take time right. We've been executing as you heard in Peter's remarks, we've been executing really well in CRM we.
Had a really strong market share gains this quarter, we added the enterprise top 20, which you just referenced that's in the U S market, we had some competitive wins and takeaways elsewhere in Latin America and expansions in Japan. So we're executing on all cylinders in core CRM and more broadly in commercial so really happy with that progress got it.
Fantastic guys. Thanks for taking my questions.
Your next question is from Brian Peterson with Raymond James.
Hi, gentlemen, thanks for taking the questions. So I wanted to hit on the sales rep reductions at some of your customers I'm, just curious versus where we were 90 days ago, how is that progressing and how should we think about the impact of those reductions in fiscal year 'twenty three versus fiscal year 'twenty two.
Yeah, I can give you an update so just as a reminder, we talked about roughly a 10% reduction happening through the end of fiscal year 'twenty four with most have been happening by the end of next year.
With regards to this quarter in particular was relatively light we saw very small a rep reductions we do anticipate we'll see more into Q4 and also most of it most of it happening through the end of next year.
Okay got it that's helpful and maybe just kind of a derivative on that it's interesting is we're starting to hear about rep reductions you would think about maybe a move to digital and I'm curious when you're engaging with your customers on the commercial side. Paul why are they talking about spending more tech technology and software with you. So you know.
Even though we're seeing this reduction should we still think about spend levels overall going up how do we kind of think about that dynamic.
Yeah, they're very much related because the reason they're able to have the productivity gains is because they are becoming more digital.
So what what's happening across the industry is whats happened largely over the last couple of years that we've been we've been driving this shift.
To help our customers become more digital more productive more efficient and now they have those productivity gains and they get to decide how they take advantage of those gains either they can reach deeper into the customer base, where they can it can take some as reductions and it's not a science and it takes a little while which is why you see it playing out over time, but yes, there was certainly a correlation.
As they consume more of our products as they become more digital.
They're already efficiency gains, which they get the benefit of it.
Thanks, Paul.
Sure once again, if you would.
Like to ask a question. Please press Star then the number one on your telephone.
Next question comes from Sterling Auty with Jpmorgan.
Hi, This is Joe on for Sterling I was wondering if you could speak to the pipeline of new add on products, particularly with CRM.
Yes.
Yeah, I can I can talk to that the add ons continue to progress really well you know over the last you know.
12 to 18 months you saw some acute spikes with some very specific add ons I would just say the tip of the spear add ons, helping our customers get to digital and you saw that spike with engage.
So we've moved much of the industry to some of the newer add ons like engage but we're seeing strength more broadly across that because they are all taken together all of those add ons help our customers be more efficient and help them become more digital to help them generate data better and operate differently. So yes, we're seeing strength not only of course.
But also in the add ons more broadly.
Thank you.
Your next question is from Stephanie Davis with SBB Leerink.
Hey, guys Congrats on Macquarie and thanks for taking my question.
Just wanted to call out.
Prepared remarks had a bunch of F&B.
I was hoping you could talk a traction.
Gotcha.
How should we think about the relative go forward opportunity and F&B, just given both broader contracts and the scale of IPO activity that we've been seeing lately.
Yeah. The SMB space is it's a really important market I mean, this is where you have.
Some of the most innovative interesting companies biotechs are often launched marching their first first Madison and this could be in something thats highly specialized oncology rare disease. So we are able to.
In many cases start very early in the development cycle with with our vault product, which is most often where we would start.
From anything from clinical to regulatory.
Anything else across the spectrum and then as they get closer to launch are often promote them into into a commercial product chat. So yeah, we're having really good strength in that space now.
Going forward I anticipate we.
We will continue to have that shrink and are those customers have the unique advantage of having a clean slate so going with development cloud going with commercial cloud becomes really hobbyist and really a whole lot easier for them compared to what somebody that may have some legacy systems.
Tied to them so yes.
It's a big value proposition with those small customers, we're making great progress there.
Does that touches on my follow up are there has been some products within your sweet they're much more likely to add ordinary attached too early or anything from them here established relationships.
And how can we think about that op neocart.
There are and it depends on where they are in their lifecycle. So certainly earlier much earlier in the lifecycle you would you would start with some of the products in and development cloud.
Is likely where they would start in quality and clinical.
Now advancing to areas like regulatory and then as they become closer to commercial they actually often start with with their medical affairs teams.
That's the first part of the organization that can seed and start positioning in the marketplace and then they expand to the to the commercial product area. So it's really we can help them along that entire spectrum.
Super helpful. Thank you.
Your next question is from Ryan Mcdonald Tibet.
Hi, Thanks for taking my questions. My first one is really around the cross six wins in the Omnichannel analytics, just curious to see what sort of momentum youre seeing in that space in terms of purchase decisions.
As digital becomes more important of an investment channel with those rep reductions physically thanks.
Yes, Youre exactly right, which is which is driving a lot of the momentum Cross Texas right.
Really the very best product in the marketplace that has been we've been building and maturing that product for a very long time, and it's doing well in the market. We expect to continue to continue down that trajectory. We're also innovating in the cross it space. So if you remember we did some really innovative things, where we took some of the interesting data that comes out of CRM and we enhanced.
<unk>, which is what our customers are looking for they're looking to us for that kind of innovation.
So, it's going well and you're right. The big driver is as our customers are doing more digital there's more of a need to measure and understand what's working and what's not working and that's why they turned across X. So yeah. We're excited about that that will continue to be a big contributor and grower for us over the next several years.
Great and then maybe as a follow up I thought it was interesting in the prepared remarks around data cloud and sort of the discovery of new use cases or any types of data within your customers. Thus far would just be curious to hear some examples of some of those new use cases.
Yeah. So the.
We started with that.
Ah patient data, that's what we have in the marketplace today longitudinal patient data and we're expanding to the other datasets that we talked that I mentioned earlier.
Our customers are able to patient data is super valuable to a life Sciences company, particularly for some of these newer more specialized precision medicines as they need to have really good and deep visibility into whats happening to that patient across the journey.
How are they getting diagnose what are some of the some of the indicators that that may mean, they have a medicine that they'd be able to treat that patient for a longer term. So it really helps you can think about that patient data to help identify where patients may be.
You can think about it as helping them to to.
Do you think about what treatments their own and when they may transition them over to their two of medicine. You can also think about it as segmenting and targeting customers. So those are some really specific use cases that our early customers are all using and taking advantage of today and they're seeing we're seeing really good results with.
Okay. Thanks for the color.
Okay.
Sure. Once again, if you would like to ask a question. Please press Star then the number one on your telephone.
Your next question comes from branch baseline with Piper Sandler.
Hi, all this is Hanna Rudolph on for Brent today. Thanks for taking my questions. First one is kind of a follow up on the last question I think in the past you've talked about customers, maybe being able to find around 10% more targets using your patient data and then using a legacy competitor data I guess, where do you see that number going once you have.
All three datasets rolled out.
Yeah, that's a that's a good question.
It will depend on certainly the therapeutic area and we're competing with.
Who we're competing with where you are comparing it to we do believe because we're taking a modern approach, we're using technology where <unk>.
Able to find the data that others are not able to find and we're able to match those datasets together and create something really robust. So that's why they're able we've been able to find additional patients and additional health care professionals and targets because of that you know do I see it it may range right, it's going to range in some some.
It may be higher it may it may be not as much.
But we're pleased that the customers are getting the value that we thought they would get out of data cloud and it's only going to go on there.
In the right direction as we continue to invest more heavily in data.
Great and then how are you thinking about head count going into next year.
Okay.
Yeah.
Yeah, I'll take that so.
We're pleased with our journey towards 10000 employees and 2025.
We have a very aggressive targets and we're focused on building the organization to drive customer success and innovation. So we're leaning in to investing in our people.
Thank you great.
Your next question comes from Brad Sills with Bank of America.
Oh, great. Thanks, guys for taking the question here congratulations on a nice quarter I wanted to ask about any any deals this quarter in that top 50 segment for clinical <unk>, how did that fare during the quarter. Thank you.
Yeah, I mean, we continue to clinical continues to go really well for us CD EMS as you know.
We continue to add customers, we've had some expansions or doing more trials, we're doing more oncology trials also as we're as we're going along those are some more complex you need to be a little bit more adaptive which is why there youre looking to something that's more flexible like C. D. So we continue to make progress every quarter, adding more trials.
<unk> progress in the enterprise also and then with some of the more.
The more established products like Etfs continues to perform well and our customers are also expanding and looking at areas like <unk>. So clinical is really proud of where that's going and then of course customers believe in our vision for digital trials and the clinical foundations and a really important part of that.
Great to hear and then and then also if I may just.
An update on the regulatory business that that's the vault that had been.
You launched earliest and has seen a lot of traction over the years, how well penetrated is that install base in other words whats the runway to cross sell and up sell that into the base from here.
Yeah Youre right. It was one of the earlier ones and its still there is a whole lot of runway left in and regulatory and also think about regulatory it is a suite of products like the other areas. So we have submissions and the ability to archive and published submissions and registrations. So it's a number of products in.
You're really seeing two dynamics, one dynamic is where customers.
Customers, who may have started with submissions registrations and they're expanding our publishing so we're seeing expansion from existing customers to buy additional apps and then Youre also seeing you saw on Peter's scripted comments that we had our first enterprise kind of go all in with a with a regulatory suite. So those two dynamics are playing out and there's certainly a lot of room.
He left there.
Great to hear thanks, Paul.
And Brad I would say a little more color in the second half of this year, you know end of Q2 and the Q3 here.
And frankly, the start of Q4, we've seen a lot of good momentum in the clinical data management I think that's been you know as I reflect a real bright spot now, particularly with large enterprises that doesn't turn into.
Orders are closed deals right away because that is a risk adverse area has a long runway but.
That's a real bright spot our progress in CD M S.
And this so far this calendar year.
Excellent Thanks Peter.
There are no further questions at this time I will now hand, it over to the management for any closing remarks.
Alright. Thank you everyone for joining today's call I'd like to thank our customers for their continued partnership and the Viva team for their commitment to customer success.
This concludes today's conference call you may now disconnect.
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