Q2 2023 Veeva Systems Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Veeva systems fiscal 2023 second quarter results call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time. Please press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press Star one thank you.
Garrett Senior director of Investor Relations you May begin your conference good afternoon, and welcome to Visa's fiscal 2023 second quarter earnings Conference call for the quarter ended July 31st 2022.
As a reminder, we posted prepared remarks can be this investor relations website, just after one PM Pacific today, we 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 Chawla, EVP of commercial strategy, and Brent Spellman, our Chief Financial Officer.
During the call we may make forward looking statements regarding trends, our strategies and the anticipated performance of the business, including guidance regarding future financial results.
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 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 August 31, 2022 based on the facts available to us today.
This call will be played or viewed after today 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 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 form.
On the call. We May also discuss certain non-GAAP metrics that we believe aid and the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release, and a 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.
Thank you <unk> and welcome everyone to the call we had a solid Q2 with revenue ahead of our guidance and operating income at our guidance.
Total revenue was $534 million up 17% year over year and subscription revenue was up 17% to $429 million non.
non-GAAP operating income was $202 million or 38%.
We've revised our full year revenue guidance down by about one 5% at the top end from $2 175 billion to $2 145 billion.
Due to foreign currency and macroeconomic factors.
We executed well in the quarter hiring was good our innovation engine is working well and our customer relationships continuing to get stronger as we have more solutions to offer in each of our solutions gets better.
Our competitive landscape and product strategy also have never been stronger.
We continue to track ahead of our goal to cross 3 billion in revenue in 2025 and have planted seeds for a long runway of growth well into the future.
Well now open up the call to your questions.
At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
First question comes from Kenneth Wong with Oppenheimer. Your line is open.
Okay fantastic. Thanks for taking my questions I've got one for Peter and then a follow up for Brent Peter You mentioned drug pricing legislation and in your prepared remarks.
I realize it's a whiles away, but would just love to get your take on maybe where that could impact the industry is it more on the commercial side, where maybe pricing causes more head count reductions or is it on the clinical side, where perhaps the.
That the opportunity looks less attractive and we see less investments in that area, but wed love to love to get your take on that.
Yeah.
Pricing.
To put it in perspective. This is specific to the U S. You know and that that's a big part of life Sciences, but certainly not the whole part of it and then it has to do with Medicaid, which as you know roughly about half of the U S and it doesn't have to do with private insurance.
And it's about the top X drugs.
And it and it gets implemented in 2026, so it's too early to say how it plays out over the long term in the short and medium term you know it's steady as she goes there is no.
There is no changes and we just have to see how this works out over the long term.
And you had a follow up question for Paul as well.
A follow up for Brent Brent when I when I look at the guidance.
I guess I just wanted to get a sense for kind of what you mentioned headwinds in the pipeline in June how did that look exiting July does that stabilize and then when thinking about the guidance are you assuming that it worsens or kind of stays at the current level.
Yes. So thanks, Ken So in June we started to see some of the macro factors our plan and that continued in July .
Pace, if you take a step back from a revenue guide perspective.
We're growing revenue, 18% after normalizing for FX, So we're pretty happy about that.
Unpack the reduction about half of the reduction is related to FX as the dollar has continued to strengthen over the last 90 days.
The other half relates to the overall macro dynamics.
Specifically.
Impacting commercial a bit more we've seen some impact across six advertising budgets have tightened a bit and we've also saw a little bit of lower add on reserves from SMB customers.
The CRM and vault commercial but want to point out that R&D has not really been impacted by the macro most of the R&D products are they are not priced on a per unit basis per user that are priced more on enterprise agreement. So.
Really no long term change in the overall business or the competitive environment.
We've seen a change in our guidance reflect specific FX impact and macro environment.
Got it perfect. Thank you for the color.
Yes.
Your next question comes from the line of Brad Sills with Bank of America. Your line is open.
Oh, great. Thanks, so much for taking my questions.
I wanted to ask about.
One on just some of the activity you saw this quarter and then another one on the macro please maybe just to start.
Stealing quality in particular stands out 52 wins this quarter.
And it sounds like R&D is holding strong despite the macro.
Would you say the footprint looks like for those initial wins are they starting small and this could potentially.
Lead to some bigger upsell deals down the road is it kind of quality first wins, if you will that could potentially lead to bigger add on deals.
Yes, I'll take that one it's really.
In the quality area across those customers so big picture what.
Happening as well.
We picked a good product strategy, a number of years ago Teva a suite of quality products all on a common platform. So quality dog QM mass training and now we've introduced the lens of laboratory information management, we've announced that.
So we're really the only company that has that integrated suite of products.
And then we have a good account coverage as well.
We're just executing so yeah. It starts it can be a small biotech that the only thing they need from us at the very beginning might be quality or it can be a new customer. That's an established customer that just happens to be starting in one of our product areas and quality and then theyre going to add multiple product there.
Areas and quality.
Or it could be a customer where quality is the first area and that's kind of lead into clinical and regulatory and others. So I would say, it's an even mix across all three and it goes across segments enterprise SMB pre commercial goes over into med tech as well.
That's great. Thanks, Peter and then Brent one for you if I may please just on the guide for billings, 9% growth. It looks like for Q3 are pretty pretty meaningful deceleration could you just help us unpack.
Currency versus macro in there and then just within the macro it sounds like youre not assuming or you did that you haven't seen R&D.
Impacted here is more commercial side is that what youre, assuming kind of in your guidance going forward. Thank you yeah, I don't recognize the 9%.
I can talk to the numbers that we have I believe.
On a constant currency basis.
We are guiding closer to 17%.
For for billings in Q3, but what we're seeing is the billing the reduction in the second half has really been factor of two things one is FX similar to revenue as well as the macro on the on the billing side about a third.
Is related to FX again to the strengthening dollar and the.
Then the balance is related to.
From a predominantly commercial again, so we talked about the <unk> piece, a second ago and lighter in uptick in number of user add ons R&D remains strong. So we're happy overall with the strength of the business and guiding 18% billings on a.
Adjusted for for FX and billing term changes.
Thanks, so much Brian .
Thank you.
Your next question comes from Rishi <unk> with RBC capital markets. Your line is open.
Wonderful. Thanks, so much for taking my question.
First of all wanted to start out by just.
Better understanding kind of some of the puts and takes of the guidance in the back half of the year, because if we take guidance at face value right now be a billings or subscription revenue the idea of reacceleration in the back half of the year seems to be off the table for now is that the right way to think about it longer term or is there still kind of.
A scenario, where we can see overall subscription growth reaccelerate above 20% I'm not asking for guidance for next year I know youll provide that next quarter, but maybe just how we should be thinking about the potential for Reacceleration and then I've got a follow up.
Yes, so FX Rishi as it definitely had an impact we called out slight acceleration expectation in revenue in the prior guidance and that has been challenged by the FX and the macro the underlying business remains as strong as we thought 90 days ago.
So that is unchanged at the competitive environment.
It's in our favor as strong as ever so I would I would think about it that way and also think about the opportunity ahead. We're still early early days in a broad opportunity across R&D.
As we are.
The operating system for that cloud and then in commercial we have a lot of opportunities as well if you think about data cloud and linked and alike. So a lot of growth opportunities.
Front of us.
Okay got it that's that's.
Helpful. And then maybe I just wanted to think about in the prepared remarks, you called out maybe some headwinds on the SMB side, I guess I'm, a little surprised to kind of see that just given.
How big your customers and how big they are spending with you is can you maybe help us understand directionally how much of your business is what you would call SMB and how youre defining that just so we can kind of better understand the model going forward, especially in this macro thank you.
Yes, sure happy to maybe it'd be good to kind of take a step back. So first off I know pharma represents about 90% of <unk> overall revenue with that with the balance being med tech can see P&C.
We think enterprise customers represent roughly 60% of our total pharma revenue and we define enterprise as the top 50 or so.
Largest pharma companies. So the balance of that is SMB, which is roughly 40% of the total pharma and this is made up of a wide range of different customer types. You have small 100 person startup company all the way to $1 billion revenue. So that's how we're defining that and pretty commercial is a small percentage of that.
Yes.
Got it that's really helpful. Thank you.
You bet.
Your next question comes from <unk> <unk> with Barclays. Your line is open.
Okay, Great Hey, guys. Thanks for taking my questions here.
Brent maybe just to start out with you can we just talk a little bit about how the all in Veeva deals are playing into this guide.
In earlier quarters I know those are obviously very big and very complicated deals that take a while or are we assuming longer sales cycles for those or lower lower size. I was just curious if you can tie those two things the Owen veeva deals and the billings adjustment for the year.
Yes, no happy to so what we've seen in some increased deal scrutiny.
And Thats and Thats on a deal by deal basis that could impact.
Various sizes of deals so that's playing into the guide for the year.
And I think you're referring to a large daily booked back in Q1, So yes, I wouldn't say, there's anything significant changing large deals other than some general additional deal scrutiny.
Got it got it that's helpful. Peter maybe for my follow up for you I was wondering if you could just dig into the cross X business, a little bit more I mean remind us kind of what are the bigger offerings, there and sort of what's changed in sort of this.
This downtick in the macro if you will.
Yes, <unk> is a few different parts to it its all related to advertising some of it is measurement how are your advertising.
Going and some of it is more programmatic, which is you can buy audience for us from us patient audiences. So there's there's a lot of details to the cross X offering but at the macro level due to the macro environment people spend a little bit less in advertising and so that flows through to crossings I would say, we're really bullish.
On cross X going forward, when we bought it about three years ago.
The idea was to use it to develop data cloud, but also to integrate CRM and cross X. So it can help the industry bring together sales and marketing and that's that's really playing out so where we are increasing our revenue and cross X overall, and we're making it a broader offering.
And even in establishing a new type of pattern with some customers where certain percentage of cross X has done is it as enterprise agreement a baseline measurement agreement therefore, it'll be a little less variable as we go forward, but these these changes take a while to play out over time.
Makes sense thanks, guys.
Thanks.
Your next question comes from Keith Weiss with Morgan Stanley . Your line is open.
Excellent. Thank you guys for taking the question.
At one.
Guidance question, one more product question.
The guidance side of the equation.
Overall ex FX billings coming down by $35 million on a $2 $3 billion base isn't huge is not a very big impact and the question I've been getting more from investors isn't why are they taking numbers down as like are they taking numbers down far enough.
The forecast conservative enough.
Maybe for Bryan I was hoping you could help us garner confidence that this is the right cut that debt that no more is going to be necessary on a go forward basis and give us some confidence that the numbers have been derisked on a go forward basis, and then on the product side I was wondering if we could dig into data cloud a little bit.
Are there frictions, there that could potentially get.
Taken away on a go forward basis sort of how that progressed faster or is it just take time to sort of get through like the network effects that the existing incumbents in that space have can you talk to us about like walking speed up or slow down progress with data cloud.
Yes, So let me take that first one Keith yes. So.
Consistent with our guidance philosophy.
Take all the best information, we give you the best view, we have of the business today.
Our broad portfolio of customers and products and so we have pretty good visibility into our pipe at various stages and we have active conversations with our customers. So we have a sense of the pacing of what theyre looking for so we've factored all that in and we considered FX at current rates there at <unk>.
We've factored in but there is some increased deal scrutiny and also some lower spend in smbs. So that was all informed in our guide for the year.
Yes, Keith I'll take the second part of your question around data cloud. So first just defining datacom at the highest level.
Data cloud is open data link encompass I think you maybe referring to compass, but let me hit each of them really quickly open data as our customer reference data steady grower that's been around for a while.
Wink.
We announced that a number of years ago. There was one product linked for key people. That's it has really great momentum momentum in the enterprise and the SMB. We also announced four additional wing products, which are.
Are getting they are all in the very early early stages with early adopters, but they are getting a lot of.
Of excitement because of the momentum we've created with our first linked products. So link family of applications Thats doing really well.
And then the third area, which I think you may be referring to.
Giving additional speed as compass encompasses remember that's our patient data. That's why we launched first in prescriber and over time, we will have sales data in that area.
We're really focused on the patient data side.
Think about the compass.
Compass is really a marathon for US right. We're in the very early stages with patient data.
It's progressing well, we had four customer wins, there and the way to think about a customer win is I'll start with the brand and that brand will have a couple of use cases not by our data for those use cases, it could be something like defining the patient journey understanding how to treat patients it may be finding more doctors.
Based on the patients that they treat thats, what they would use it for.
We have to deliver customer success in those areas and then once we deliver on that we will expand within that brand team maybe additional products and then also across brands selling new products to other brands in that company. So you can see it's kind of step wise it will take time for us.
There is we're accelerating in that space, we're highly focused on it.
And we think all the time about things about how we can kind of further accelerating there and we're executing on most of it so I'm happy with the execution.
Well.
But that gives you a sense of what's in data cloud and always feed on each other right. All the products are connected together sure.
We think we have the right product strategy and we're going to continue to execute that.
Super helpful guys. Thank you.
Your next question comes from Gabriela Borges with Goldman Sachs. Your line is open.
Hi, Good afternoon, I have a head Peter off of Brian I'd Love to revisit the trajectory of the core CRM business. The piece, that's based on pricing and <unk>.
You've been pretty consistent saying that new customer seats will more than offset production.
Could you remind us do you think will turn into the largest headwind after production dynamic does return and can you put some time.
With that how do we think about the trajectory of that specific piece of commercial guy.
Okay.
Yes, so Rick.
Guarding the commerce peso, we still believe that.
10% is the right number over time.
<unk> seen anything that has changed that view, but we do expect to continue to take share and as we take share that the impact of Veeva will in fact be less overall, we feel good about our ability to continue to expand the footprint of CRM as well as our add on business associated with it.
Thank you the follow up is on CDN mass a couple of comments in the prepared remarks, I know that was a customer win announced in the quarter as well, we'd love to get a little more detail how should we think about the trajectory of seeding that.
Is there a scenario where that becomes more significant more material driver of growth either in the next 12 months or perhaps in the next 24 months.
I'll take that one <unk> I would say really happy with the progress in the quarter.
And why do I say that is just the the momentum.
Especially in the enterprise segment, the customer success with with.
A couple of large enterprise customers that we have and the progression of the sales cycle with some other enterprise customers.
A lot of gives me a lot of confidence.
Our goal there is to be the leader in that area over time, and I think we'll get there.
Then that also leads into our digital trials right you had success in the in the core C. D. M. S area. There are other products adjacent to see Dms, which is the <unk> pro patient reported outcomes.
That type of thing the recently purchased randomization and trial supply management as well so theres a lot of adjacent things so.
Be happier with our progress in that that one also that looks like compass that one is a marathon, but where we're.
We're ahead of the game.
Think most people would say who's going to win that race.
Too early to call that rates for compass, because we're just getting started so very different compass in CMS.
Thanks for the comments.
Your next question comes from Dylan Becker with William Blair. Your line is open.
Hey, guys. Thanks for taking the questions maybe first for Peter I think there was something in the prepared remarks realm.
Relative to the growing number of customers with that vision for a unified platform.
It's not something that's necessarily going to happen Tonight, but obviously you guys are heavily embedded in that strategic discussions. So maybe can you talk about the progression of that of that road roadmap, what the future adoption can look like and how you can assign maybe some of the value with some of those earlier tools to support that broader platform standardization overtime.
Yeah, It's a good question so.
Big picture, we're getting we're getting more products in each of the products are getting better and we're fitting them together very nicely.
And we saw that with Dev cloud first where we Oh I guess six years ago four years ago, We started really painting the big picture and now we're just executing on it just executing commercial we're doing that now as well we made a lot of progress. This year. So we have good stable happy customers and CRM.
And in commercial content and we're leveraging that for success in these big new areas.
Crossings.
The cloud and actually our business consulting, which is our business consulting is going well we started three years ago.
And it's quite profitable and it has a 150 people. So what we're seeing is our.
Our product strategy is right on the commercial side and on the R&D side, and we're executing well.
It was really encouraged by this quarter because we can.
We just executed well and the macro environment actually helps us for the long term.
Because during this time theres, a flight to quality with customers and with employees. So more re hires more hires getting more people planning more seeds for future growth those things all that.
They all ladder up to a more strategic relationship when you have more excellent products they fit together better.
Can you just get more excellent relationships.
And the macro you know that that happens I've seen that a lot I saw that one of those guys.
I saw the dot com boom in the Dot com bust I, even saw Y two K in that thing.
Financial crisis, and now we see Covid Covid happened and then the overspending by governments the inflation the correction.
The war in Ukraine, et cetera, but you get through these things and it's really about it's just about execution do you have the right blueprint of what Youre doing can you stay focused can you execute with excellence in the product in the field.
And then you do okay. So.
So that's why you hear optimism for me because I feel like the.
We got a plan and its working.
Yeah, and maybe if we could we could follow up on that to a certain extent as well to you highlighted a lot of kind of the ongoing innovation a number of new product announcements and the strategic value of that business consulting segment, maybe to the point now where it just drives decisioning today, but relative to that potential value capture and maybe that's it.
In an area of growing incremental reliance on V, but I'd say, hey, we want you to develop more of these kind of capabilities and solutions. Obviously, you can go out and capture more of the overall opportunity, but to continue to to expand and develop that market speaking to your point on on the long term maybe favorability from from what you guys are seeing today as well.
Yeah, I agree with you it kind of this consulting as a complete.
A picture for Veeva strategic discussions about with our customers how can they change their go to market much emotion.
And that leads into both being able to introduce our products, but also to influence our products because we have a very tight relationship between our consulting group our product group and our sales group the feedback loop is very tight.
And.
I don't know about every company in the World that's for sure, but I don't know about any company that has this mix inside one company and.
It's really feeling good.
Okay.
Thanks, guys.
Your next question comes from Kirk <unk> with Evercore ISI. Your line is open.
Yes, thanks, very much one for Peter and one for Brent I guess, Peter just to start you mentioned, a second ago that the macro actually might help you a little bit I was just kind of curious on the R&D side I know you haven't seen anything yet but is there any chance of re prioritization around certain products may be moving up.
Priority list for your customers in a tougher environment.
Versus where they might have been in a more normalized environment and I know, it's a hard thing to guests. After I was just kind of curious if youre seeing that perhaps at the top end of the funnel at all and then Brett just on your comments about small businesses are you, referring specifically to some of your smaller biotech customers. The reason I ask because I assume most of those are more R&D customers not necessarily.
Like commercial customer. So I was just curious if you could clarify that a little bit. Thanks.
Yeah.
The first question there.
Yes for sure in this environment, it's not great to be selling nice to have products right. Those are the first to get you know.
The downturn and we don't have a lot of nice to have products, we have real foundational ones.
I would say.
Things are looking good for us the advertising which is the.
The cross six related business, that's required over the long term, but you can modulate it up up and down.
So our product footprint is more about building.
It's building capabilities for the long term not nice to have it's susceptible a little bit here. When you. When you have these hiccups in the macro causes people to reassess a little bit okay, what's going on but where you really don't want to be as an and a nice to have products that doesn't work well in this environment.
Actually I guess follow up on that I was actually referring to your product portfolio, meaning I realize none of your products are going anywhere, they're all foundational, but I was wondering even within your R&D product portfolio are there things that might become more of an imperative in the short term versus versus others that might not be the case, but just curious.
Yes, it's an excellent question no not really.
Because they're all they're all pretty foundational and they are they are in their areas. You know if you're in safety. That's the most important thing to you.
The clinical data management area. That's the most important thing to you. So theres no theres, no particular boost or slowdown in any particular area.
Okay.
And then Kurt to your to your second question.
We did see it.
Some of that we've talked about lower spending and smbs and that's more in the lower half of that SMB destination that I was describing before because that SMB space is a very wide space, but our pre commercial.
<unk> is really relatively small.
Thank you Oliver I was just I was just reflecting on your question curtain give you a bonus answer here.
In terms of the products. It has more to do with just the natural cycles in the industry that which run longer than the temporary macro. So for example, some of the best progress we've had in the last year is actually in our regulatory in the upper end of the enterprise in the regulatory area and Thats, just a function of us having good <unk>.
Products and customer success in the industry, just it's a natural we're approaching that second replacement cycle.
So it's more than natural rhythms, rather than the macro.
Thank you all.
Your next question comes from Tyler Radke with Citi. Your line is open.
Yes, thanks for taking the question.
Wanted to ask you just in terms of the linearity in the quarter.
Kind of how that tracked in when you started to notice that.
Slowdown in your pipeline and then just a follow up on <unk> question I guess.
Look at your R&D guidance for the full year it.
It did come down slightly I presume some of that was FX.
So didn't take up the revenue guidance. So I guess are there certain portions of the R&D portfolio that are seeing deal delays, perhaps CMS, where the deal sizes tend to be larger.
Just help us understand the moving pieces, there and any comment on linearity. Thank you.
Yes, so there's a few questions there so on linearity, we started to see some.
The impact in the later part of June .
So that was where we started to see a little bit of the headwinds from lower spending and smbs and a little bit of additional deal scrutiny sort of the.
The quarter started out a.
A little bit more typical and then we started to see that later.
In the month of June and then related to R&D on a on a if you if you exclude the impact of FX on a full year basis, it's closer to 32% growth.
Full year. So we're very pleased with what we're seeing from our momentum in the <unk>.
R&D space now that theyre not completely immune to either through additional deal scrutiny. So if it's a large deal.
There could be additional levels of approval and inspection on that but we have not seen anything significant in the R&D space.
Great. Thank you.
Your next question comes from Ryan Macdonald with Needham <unk> Company. Your line is open.
Hi, Thanks for taking my questions, maybe first on the commercial side of the business.
We've recently and some of the checks as.
As we're thinking about budgets for 2012 calendar year 'twenty three picked up that some budgets are starting to remain sort of static on a year over year basis for sales and marketing just curious if this is something that yours, a phenomenon, you're seeing as well and perhaps how does that impact how you're thinking about beyond back half of the year.
Into next year, particularly on that commercial side of the business. Thanks.
Hey, Ryan This is Paul can you just repeat the specific phenomenon.
Broke up when you said that.
Oh, sorry, yeah.
Yes, yes, yes, and some of our checks we were starting to pick up that as we look at budget planning for sales and marketing.
Adding into next year as budgets are sort of remaining static rather than growing on a year over year basis, and so to put that in the context of sort of the guidance updated guidance today.
One are you seeing that in to what does that potentially say about the prolong of any headwinds on the commercial side of the business got.
Got it okay. Thanks, Brian Thanks for repeating that.
We're most of the industry is entering their budget planning cycle right now so there's a lot of those conversations are kind of hitting full swing and most life sciences companies and no I have not heard or seen that yet.
It shows.
Again, Mike Peter talked about a lot of what pharma does is these longer cycle longer planning these kinds of things and we haven't seen any indication that budgets will be will be impacted next year. So we haven't heard that yet.
But time will tell.
Okay.
Thanks, and maybe just a quick clarifying question on the SMB commentary are you seeing any churn at the SMB level or is this more of a lack of expansion.
And spend at the SMB level.
Yes, it's mostly a lack of expansion so the add on of additional CRM users add on of chrome out users. There is always some level of churn that happens and you don't see it but companies get acquired as one example, our companies go out of business.
They come up when they go down that is very natural it's very common that happens every single quarter.
That was not unusual in this quarter was more what what Brent had referenced earlier.
Thanks for the color.
Okay.
Your next question comes from Jack Wallace with Guggenheim. Your line is open.
Hey, Thanks for taking the questions two.
Two of them for you.
And I realized.
Collectively hit the guidance question pretty hard here I just wanted to use it from a different angle.
Are there any geographic areas, maybe in particular, the euro zone, where decision making is slowing more than others.
And then I've got a follow up.
Yeah, we're not seeing anything particular in a specific geo that when it was worthy of calling out.
From a additional exposure perspective.
Got it thank you and then.
Is it big hiring quarter, you called out a couple of occasions then.
<unk> is a good place to work and potentially some of the smaller previously faster growing.
Public or private companies may not be as attractive to do some of that talent.
Youre thinking about talent.
Leaving there being multiple compression, particularly in the in the private markets looking at your balance sheet, you've got nearly $3 billion in cash as the M&A pipeline picked up.
I'm not sure we're getting closer.
Youre doing a couple of more deals just thinking about capital deployment.
Yeah, I'll take that one certainly hiring environment.
It's better now than it was a year ago in terms of M&A potential when the valuations come down.
Calculation comes off a little bit.
It is a more attractive M&A environment, and so we're looking but we're always patient.
We have a.
So far 100% track record of success on our acquisitions.
To do so we're a bit careful in surgical but what were looking and when you're looking you might find something but you don't know exactly when you'll find it.
Okay. Thanks again.
Your next question comes from Joe <unk> with Baird. Your line is open.
Great Hi, everyone.
Just peel back the onion, a little bit more on commercial performance.
$17 million.
Lower subscription revenue guidance most of that seems to be coming in the second half.
Specifically apply that to what I imagine the cross X revenue basis. It implies a rather large change in cross ex performance is that Directionally correct and does that just speak to the extent of kind of AD budget changes that those associates.
Yes.
Hey.
If you see if you take a look at the reduction I'm half of it is FX related and then you can kind of split the other balance between cross X, which you've called out there was a little bit more pronounced impact to the cross X business and then the balance would be more broadly. So I think your observation is.
Is it good one.
Okay great.
And then I know, we've if we've kind of asked this question a couple of different times, but.
Based on your operating history, Nbn through ebbs and flows understand Australia.
Does it stand out to you that there is specific areas of your business. It seems like it's falling exclusively on commercial that are getting caught up in the macro where R&D is forging ahead, 32% organic.
And the enterprise commercial solutions like a line of that data.
Don't seem to be changing.
Is that kind of in line with what you would expect to be resiliency or is there the potential that maybe those things just see effects, but with a lag.
Sure.
So I think we're seeing the impact today is as you mentioned before on the commercial side, where it's more user based.
Consumption, so that modulate so a bit more in the macro so again it was more pronounced in <unk> and we saw it with some of our AD.
Add on business, so that within the year, we haven't we haven't seen it on the R&D side on the on the <unk>.
Longer term Elas type business.
Those are longer really strategic type deal and the.
<unk>.
They're less likely to be impacted I would say over time.
I would add it has to do with the maturity of the products as well across its being a special case that can go up and down with the advertising.
If we look at our very mature and high market share products like <unk>, the commercial content and CRM and.
And that's where you're going to see it a little bit more.
You have to remember in these other <unk>.
Growth areas, where we're just getting started so data cloud.
Including land can compass in their business consulting and then the R&D area Tasty CMS these new quality products.
That's where.
It's mostly just about capturing new market share and Thats, where.
We're not as susceptible there that's just the natural cycle of getting your early adopters live and happy getting the value out there and then and then capturing the market.
That that area has more to do with the competitive environment and it has to do with the macro.
Thank you very much.
As a reminder, if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad.
Your next question comes from Jessica along with Raymond James Your line is open.
Hey, its Brian Peterson.
Brent I just wanted to follow up on some earlier questions I appreciate all the disclosure on the SMB business, but but if we had to think about where youre seeing the most pronounced weakness there is it actually with the larger end of that SMB that are more commercial where there is a more pronounced impact I'm just getting questions from investors because I think a lot of people thought maybe the F&B exposure was.
More R&D focus just given the pre commercial nature. So I don't know if there's a way to split that out I guess I just need to make sure. We're all clear on the same page there.
Yeah, Hey, Brian so.
Exposure, we're saying it's more on the commercial side as we said before and it's more on the lower end of the SMB space now we still are seeing like I said before increased scrutiny on larger deals that cut across both commercial and R&D, but as far as the lower spending in SMB that is more pronounced on the on the.
On the lower end and on the commercial side.
Okay got it and maybe just one last clarification any any help on how projects is priced have you guys disclosed that just in terms of like the methodology.
We don't we don't really disclose that at a detailed level.
We have multiple products in prospects that are priced differently, but in general they will they will follow the amount of advertising spend the customer does in general. So that's how that's the way you should think about that.
Understood. Thank you.
Thank you.
And there are no further questions in queue I'd like to turn the call back to CEO , Peter Gassner for closing remarks.
Alright, Thank you everyone for joining the call today and thank you to our customers for your continued partnership and to the Veeva team for your outstanding work in the quarter. Thank you.
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