Q1 2024 Veeva Systems Inc Earnings Call
Hello, and welcome to the Veeva systems fiscal 2024 first quarter results conference call. All lines have been placed on mute to prevent any bally's.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star one on your telephone keypad, if you'd like to withdraw your question again Press Star One I will now turn the conference over to Gunnar Hansen director of Investor Relations.
Please go ahead.
Good afternoon, and welcome to <unk> fiscal 2024 first quarter earnings conference call for the quarter ended April 32023, as a reminder, we posted prepared remarks on Viva is Investor Relations website, just after one PM Pacific today.
Hope you have had a chance to read them before our 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 commercial strategy and brand development, our Chief Financial Officer.
During this call we may make forward looking statements regarding trends, our strategies and the anticipated performance of the business, including guidance regarding future financial results.
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 refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-K.
Forward looking statements made during this call are being made as of today May 31, 2023 based on the facts available to us today.
This call is replayed or viewed after today.
Formation presented during the call may not contain current or accurate information.
EBIT disclaims any obligation to update or revise any forward looking statements.
We may discuss our guidance on today's call, but we 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 on today's earnings release and in our supplemental earnings investor presentation, both of which are available on our website.
Thank you for joining us and I'll turn the call over to Peter.
Okay.
Thank you Gunnar and welcome everyone to the call.
Have a great start to the year delivering results ahead of guidance with total revenue coming in at 526 million.
The macro economic environment with stable and it was another quarter of strong execution across R&D and commercial.
And commercial development of vault CRM is on track and we gave a compelling demo at summit.
We expect to have our first customers live on vault CRM early next year.
We also announced two new compass data products and our first AI application CRM bought <unk> CRM.
We also saw continued momentum in development cloud across all areas.
Our product strategies in R&D, and commercial are clear and compelling and we have a long runway of growth ahead.
At this point, we'll open up the call to your questions.
Thank you if you have a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue simply press Star One again, one moment for your first question.
Your first question comes from the line of Joe ROIC of Baird. Please go ahead.
Yes.
Oh, Great Hey, everyone, maybe just to start off the commercial summit a few weeks ago curious to hear a feedback from customers and partners on what they saw and liked or maybe didn't like out of vault CRM and any key messages out of the summer that maybe help them.
Or change how youre thinking about introducing the product starting you know trying to fight for and in the 2025.
Yes.
Hey, Joe This is Paul Thanks for the question. So some of it was great.
Nearly 2000 people there was a great event. It was our first showcase of our CRM we demoed.
To a broad audience and generated a lot of excitement I would say there was a couple of specific things and our customers. We're excited about our first is the idea that they're going to get the full functionality of everything we've delivered and Veeva CRM over the past 15 years all of that plays forward into CRM, So what that means for our customers.
Everything they are investigating all forgetting the advantage of <unk>.
So full functionality was a really big big value prop for our customers I would say number two.
We.
Big announcements that we have.
Service Center, which is for inside sales reps and hybrid reps. These are people that need access to the core veeva CRM functionality, but they also need access to things like handling inbound calls and cases. So they are excited that this is all going to be part of one application.
But also CRM boss, which is super exciting.
Peter's remarks about generative AI and this is going to be the first application that we're building is going to be part of our CRM. So that generated a lot of excitement and I guess, maybe the third thing was.
The approach, we're taking to helping the industry move to Volte CRM. So same applications same data model, helping customers move their data their configuration theyre excited about how.
We're going to help them make the transition. So overall really positive events a lot of really positive feedback on our direction involves here.
Okay. That's that's all great. Thanks, Paul.
And then maybe just on the macro it's been a few quarters now where it's at Viva Aside and you know ultimately macro meeting your expectations I guess sitting here on the outside the macro and things like biotech funding you know it seems pretty dynamic over that same stretch of time is.
The Delta here, just maybe devos opportunity is it your execution.
How do you maybe reconcile.
Kind of those those two comments.
Yes ill take that one this is pierre.
In general the industry operates I'm pretty long cycle, especially are very established.
Tablets and large customers so the ups and downs of the macro environment don't really affect them too much we do see a little bit more effect in what color emerging biotechs, either small customers generally don't have approved products. So we see when funding gets tight we see.
A little bit of pressure there, but nothing really has changed in the last 90 days.
Macro level so.
I guess, that's why we're not so susceptible to those small ups and downs in that business just continues to move forward.
Thank you. Your next question comes from the line of Ken Wong of Oppenheimer and company. Please go ahead.
Fantastic Hey, This first question is for Brian just wanted to ask about Unbilled AR saw a big spike up on the cash flow.
What drove that and how should we think about that trajectory is it just going to be a tailwind until the balance sheet rounds to zero, what's the what's the right mapping on that.
Yes, so a couple of things there on the Unbilled.
And then there was the there was a decline right. So in that part of what Youre seeing there was on the termination for convenience playing through but on the ocs align overall we.
We're really pleased with our strong execution in the quarter on a full year basis, we've increased the number by $30 million. So we're at 840 million, which is growing at about 20%. So feel really good about the execution and for the quarter and the outlook for the year.
Got it so it wasn't any kind of abnormal contract. This is this was kind of how you expected it to play out with the with the removal of or the inclusion of the TSA is.
Absolutely correct. So from a CMC perspective, just put it in complete context, we know what we expected to happen happened in Q1, and what we expected to happen for the full year is still intact. So no surprises.
It.
Yeah.
Thank you. Your next question comes from the line of Brian Peterson of Raymond James. Please go ahead.
Hi, guys. Thanks for taking the question maybe just one for Paul So Paul I think there's been some debate on a at least from investors on how customize some of the CRM implementations are in and how big of a lift it may be to actually migrate over to vault has there been any feedback on that so far and I also loved to understand there was a comment in the prepared.
Third remarks that you expect to have some early customers live at the summit next year, how is that trending relative to your expectations. Thanks guys.
Yeah, Hey, Brian Thanks for the question, yes, so the way I would think about it as some companies have it.
Adhere it pretty close to what Viva delivers kind of standard in our standard products are have done relatively straightforward configurations and other companies have done more customization, particularly some of the larger companies.
And then there is different ways to make the move to Paul CRM. So one way is to just to an extensive technical migration.
Another way is to think about changing process business process change as they make that transition. So the level of complexity of the move is going to depend on how much customization they've done but also the approach that they're taking.
Can move over if theyre going to change process or if they're just going to keep things and just do a simple technical migration. So lots of variables going on there, but what we're doing is we're trying to make it as easy as possible for our customers and we made some really important design decisions to try to make that simple keeping the data model. The same keeping the application of the same.
<unk>.
Moving all of their data for them moving their configuration for customers. So we're automating as much of a move as possible now.
Now you're right. We did talk about early customers going live.
As early as our summit next year likely what those will be will be from net new customers. For example, this quarter, we announced 11, new SMB wins, it would likely be a company like that that would go live.
And that first move and then I would expect.
<unk> to happen starting in 2025, so the first customers who were on Veeva CRM moving over to Volte CRM starting in 2025 with most of those still happening in the 2026% to 2029 timeframe.
Great. Thanks, Paul.
Your next question comes from the line of Richie Deloria of RBC capital markets. Please go ahead.
Great. Thanks, This is rich calling on duration.
So first question would just be on the.
2026 to 22009 timeframe, just curious with some of the new functionality that you are adding into the platform like the.
The bots as well as the service center should we think about that as being something that could help you know those migrations happen a little bit earlier on that curve is that something that's kind of I guess specific to to the vault platform.
Yes, Youre right those.
<unk> will be specific to the vault platform. So we'll build service center that will be part of the vault CRM application and also the same with SaaS CRM box that will be part of our CRM, so that may or.
Or may not be additional incentive for customers to move but I can tell you that based on the feedback that we've heard from pharma customers are excited about both of them are excited about those opportunities.
And that was the promise the promise was they get the full functionality of Veeva CRM, they get a deep market, leading application and theyre going to get new innovation over time.
Great. Thank you and then just a follow up on some of the Ah I.
I know combat Swift all of that I guess, new data personas that have been added there. It seems like you are now kind of ready to take on the incumbents in that space and the messaging has kind of come across that in the past two quarters.
So am I thinking about that right and how we should we think about the timeline I guess first starting to really attack that opportunity.
Yeah. That's that's the right way to think about the full suite of data products for the commercial area.
And a streamlined simplified suite of data products. One thing you could compare it to a different domain, but in a quality area and that's something we've had for many years now and we introduced.
Quality Docs document management system regulated content management system, <unk>, which is the structured data quality management system and we have training. It all fits together on a unified data model on one common platform. That's what we're doing for our company. So we have patient now which is the anonymous pace.
<unk> data.
3 billion rows of patient data in the U S.
Prescriptions procedures diagnosis.
Now, we're adding in January as Compass prescriber and.
Encompass sales and those are projected data products about priest.
Prescribers prescribing patterns individual prescribers.
And also acquisition state level and the national level. So they all fit together on one common data model they are separate products.
Very separate different purposes. So for the first time in January we will have this suite of products and I think that's what customers will find compelling.
And then just like we always do we have to get a customer to have all three of those products have to get them live using it have to get them happy round up the corners.
Get them talking to other customers and that's one thing about competition.
Usually the best product and the best service will win and when you. When you look at Compass and how we talk to customers. They're our message is pretty simple, it's about better data and better service.
And.
So it's just execution game I feel very comfortable about our product strategy Appeals.
Similar to what we've done in some of our our vault tweets before and now it's just down to executing.
Thank you. Your next question comes from the line.
Dylan Becker of William Blair. Please go ahead.
Hey, guys I appreciate you, taking the questions and I really really nice job here, maybe Peter I wanted to.
Hone in on two comments in the prepared remarks first you talked about kind of serving as the AI focal point for the industry I know you rolled out CRM bot.
Wondering how youre thinking about the long term optionality there to utilize AI and machine learning models to automate. These key processes again, you have highly specialized unique data that gives you a holistic view through the commercial the clinical and the compass kind of dataset. So I'm wondering how you're thinking about the evolution of the AI capabilities over time.
Okay.
Yes, I like our position as it relates to AI because they are a core system of record. So that that's something you're always going to need I think thats one thing that.
People should always understand core system of records will be needed even in the world of AI I ask brand tape brands do you think 10 years from now you'll need a financial system.
To manage your financials, he's going to tell me, yes, I really need one you can't take it away Chad CPG won't do it for me I'm, making a joke there, but our customers have the same critical operational systems around drug safety around clinical trials around regulatory around their quality processes. So those are always going to be new.
Good.
Now we're also building our data assets and these are proprietary data assets link.
And we're building more data assets those will also be not affected by AI, but AI will be able to leverage those assets to make those assets more valuable. So I think we will develop more well do basically three things will develop more applications over time CRM bought the first we got to get that right.
We also.
<unk>.
Our proprietary data, we will get more valuable and the third thing we will do is make our applications fit very well when customers have their own proprietary AI applications, especially the vault platform will do a lot of work in there to make it fit really well with the other applications they have from other vendors.
They developed themselves because it's an open ecosystem and that's how.
That's part of being Viva we are this broad platform for the customers and where ecosystem in which they can plug in there their own intelligence and their their own partnerships. So.
I'm really excited about how AI is going to play out it's very clear what we need to do.
That's crystal clear and I appreciate I appreciate the color there maybe.
Maybe another one for you and maybe kind of piggyback off of that a little bit, but I think there was a comment around the innovation engine being as strong as ever.
But today too which is again impressive given the historical track record in the business I Wonder is this a function of the relative kind of maturation of some of these larger opportunities like compass clinical data on safety quality et cetera that you've been able to maybe scratching the surface on and now dig deeper in with those customers and maybe how that payers with that.
Customers that are now increasingly look to you for standardization and maybe opening up their roadmaps, and saying, Hey, here's how I want to develop a plan with Viva. Thank you guys.
Yes.
So I think the main thing is we're getting very good at being a multi product company.
<unk> been working on that for a week.
We've been in business for about 16 years now we've been a multi product company really I guess since 2012 ish something like that to more than 10 years now we have a lot of products and we're getting good at it in our operating model, how we manage economy, what roles and responsibilities are and Theres a lot of people and Viva that know that operating model and know how to.
Fit into it so 6000 people at Viva. So we can do more parallel processing and.
We just keep doubling down and getting better at being a true great multi product company, which is which is relatively rare air.
And then so that I would say the macro level, that's what I mean by our innovation engine for instance, we have people at Viva now other than me who are good at overseeing others, who are doing the innovation.
And it's relatively rare.
Now also we have a deeper customer relationships and we've got one than we've ever had and that that just really helps because you get the benefit of the doubt when you have that customer relationship you get early customers faster you get more clear feedback.
And I would say.
Third thing is also when we make in innovation were often making an integration to our existing products. So if you look at for example, our safety product. It's a very good product on its own but the promise of having it integrated into our clinical products. That's an advantage that another company doesn't have it's there.
If theyre just starting up a safety product on their own so long winded answer there.
But it is an insightful question and it's something I'm very proud of our innovation engine, it's rare air.
Thank you. Your next question comes from the line of Craig heading back of Morgan Stanley . Please go ahead.
Yes. Thank you just following up on the macro commentary are you able to provide some context, just a rough exposure to emerging biotech given that's kind of a source of debate in terms of funding and then more broadly I think last year, you talked about in the SMB space kind of impact to add ons, just kind of what youre seeing on that.
Frank.
Sure Craig This is Brent I'll take that yes, so as Peter mentioned earlier, we're not we don't have a significant exposure to the emerging biotech and if you think about it in terms of total revenue its about 4%. So kind of you can think about that and that's comprised of about 1000 employees with no approved product.
So that kind of gives you some context of that that part of the business.
And then your second question, Craig I want to make sure I get it right.
Oh, just an SMB more broadly in terms of the macro just maybe some impact to add ons kind of what you've been seeing recently.
So over the last 90 days, we really haven't seen.
I see a significant change in the macro.
So we can take continues to be impacted but we factored that all into the guide in and where we are executing well in that area.
Got it and then just a quick follow up for Peter just on the fantasy announcement recently and more broadly kind of whats resonating in the R&D space and what that means via target the multiyear target of a 30% CAGR, how you're feeling about that.
Sorry, I didn't catch that question about which announcements.
The <unk> announcement.
And that one.
I know, we do a lot of work with Santa Fe I don't know the specifics of the announcement Paul do you are you more in.
I think you're probably referring to the Santa Fe quality announcement, where they've adopted our quality documentation quality management suite.
Is that yes.
Sure.
Yes, so I think what youre, what youre seeing there first of all we're excited about quality.
So significant market, we've introduced a lot of new applications and innovation in there and this is another good example.
That unified quality suite that value proposition, playing through and I think that's what canopy.
So they are trying to streamline and modernize their quality processes and they're standardizing on <unk>.
Bob quality to do that so super exciting a good example of another large company kind of in a sense going all in to modernize the quality and manufacturing process.
Thank you. Your next question comes from the line of Brent bracelet of Piper Sandler. Please go ahead.
Hi, guys. This is Hannah Rudolph on for Brent today. Thanks for taking my questions. Just first one for you call. I guess are there customers that are waiting for all three of you accomplish products to VGA before adopting them as a full suite rather than just adopting one at a time.
Okay.
We have been for the way, we announced and launched this we focused in on patient data. So we're focusing on customers that can get started relatively quickly and they're exploring they're testing our patient data most of them are finding that to Peter's point earlier, it's actually better data they're getting.
In a broader view.
Into the markets they are finding more patients for finding more doctors.
That's a very specific market.
That we've been focused on we haven't been focused on trying to sell the full suite of it hasnt been available yet so I wouldn't say that companies are holding back because we're not really focused on that part of the market now.
Given the fact that we're not that far away from having that full set of products by January of next year, we will have everything we need to be a full replacement. It will open up a broader part of the market for us.
Okay. It makes sense and then second one for you Brian how are you thinking about the monetization of your CRM bought product and then any future AI products release.
Yes.
Really early right now we're focused on ensuring that we have the right product working with our customers. So that's our that's our focus right now let's get the product right and then we'll get into more of the details on kind of the sizing and the opportunity there, but we're excited overall about the opportunity we have in front of us.
Thank you. Your next question comes from the line of Ryan Macdonald of Needham. Please go ahead.
Hey, Thanks for taking the question. This is Matt Shea on for Ryan.
I wanted to start with some of the new applications, you guys announced around vault CRM service center in the CRM, but I know what the service center and you announced it would be free but the CRM bought it's not clear if it'll be free. So do you plan on monetizing the CRM bought or some of your other generative AI investments in the future and as we think about likely additional applications.
You add around the CRM.
View this as a lever to potentially increase revenue per account over time, our March so as a retention tool as you go through the re platforming on default.
Yes, I can take that one so if we start with service center Thats included in Veeva CRM, It will probably <unk>.
And more CRM licenses overtime, because maybe somebody that was a pure inside sales rep, maybe they didn't use veeva CRM some type of thing like that so.
It's included in the license, but it may mean more users CRM Bob will isn't that's not included products. So that will have a license that will most likely be licensed by the user so that will be net new but as Brent mentioned, we are focused on getting the product right.
We don't have pricing for that are sizing for that yet.
Got it that's helpful and then with your data assets Lincoln Compass, what has been the selling point when competing against some of the other data incumbents has service quality and the integrations across the broader platform, but enough to displace existing vendors or do you anticipate being competitive on prices.
Well I'd just love to get some of your strategic go to market thinking around those data assets.
With link, which we've had for a while specifically link key people that.
It's often somewhat of a new category for our customers. This real time customer intelligence.
So either they did it internally or they had a vendor that was sort of sub standard in that area. So it's kind of.
There were kind of creating the market and teaching people here's the value you can get with a data asset like that and that then is continuing on as we broaden out to link suite.
For key accounts, and we're bringing out for clinical trials and pre <unk>.
Clinical research side, so that's more of a education campaigns.
For Compass.
A direct replacement where the major incumbent there is <unk>.
<unk> has a set of data products are quite a few that they've built up over the time over time.
And there it's more simple hey, we have a more modern solution.
Moving parts.
They can probably save some money on that.
I don't think Thats the primary.
The primary reason that would go with us it would be more more modern product that works for more complex medicines.
Better data and better delivery, but that wanted to replacement just like.
Originally when the company started siebel CRM that was from Oracle that was the dominant market leader in pharma CRM.
And was it replacement job replacement parts Veeva CRM is better it's cloud it's better.
Outlet placebo and with the Viva. This is gonna be similar type of thing <unk> for that data and with the Viva.
Now make no mistake, that's hard work right, we have to execute well to make that happen.
Thank you. Your next question comes from the line of Gabriella barges of Goldman Sachs. Please go ahead.
Hi, This is Kelly of Lindsay on for Gabriela.
You provided some visibility into fiscal year 'twenty five last quarter can you just walk us through under what circumstances that outlook could turn out to be too bullish or in what circumstances, you would kind of exceed that outlook and how is your visibility into that now compares compares now to last quarter.
Yes. So thanks for the question so looking now at just <unk>.
25, we reiterated our guidance so at least $2 8 billion in at least $1 billion in operating income.
We're expecting that the current macro situation is constant and so there is no change there is no improvement it doesn't get worse. So that's kind of our assumption as we look out in time.
So we're excited about the opportunities we're early days in a large market opportunity.
And.
That that's the best look at the business, we have right now.
Alright. Thank you and then I wanted to circle back to the Merck partnership you announced last year I realize it's still early days with that but are you seeing any impact of Viva is business as a result of that partnership either from a product roadmap perspective, or any additional product adoption from Merck.
Okay.
I'll take that one I couldn't comment on the specifics of Merck product adoption.
Would really say that the partnership is working we're thrilled with the partnership I think Merck is getting value from it by a very open relationship with with fever, that's helping to transform their business to be more digital and data driven we are certainly getting value out of it because we're learning how to manage a customer with a true true partnership.
Pat like that that starts at the CEO level. So we are rethinking about what's possible.
It is not shaping our product strategy so much as you know.
Specifically, what we'll do and what products, but I think it is shaping our delivery strategy and how we manage and partnership and partnering with customers because it's a whole different selling motion.
More.
Our selling motion.
It's a partnership motion.
So couldnt be more happy with that it's to me, it's one of the highlights of our year.
Thank you. Your next question comes from the line of Jack Wallace of Guggenheim Securities. Please go ahead.
Hey, Thanks for taking my questions.
I wanted to ask about the kind of environment.
For the CRM business six seven months since the <unk>.
The announcement too.
Move to your own platform.
You have seen so far from.
Your larger.
Of your other other competitors.
Salesforce I think UBS. Thank you.
Yes, Jack Thanks, if I can take that.
So.
We still we still see IQ via pretty consistently we also see.
<unk> competitors, none of that has changed.
We continue to compete with them we win most of the time Im excited about the 11, new wins that we've added in the quarter. So we're continuing to add customers in a pretty tight environment. So I'm excited about our progress our execution and CRM.
With regard you asked about <unk> you asked about Salesforce also I'll give you some commentary on.
On Salesforce, it's been six months since we made that announcement the partnership the way we're working together disappoint joined to support our joint customers is working well I'm not surprised by that but I'm pleased that that's continuing so we continue to work well together from an operational day to day standpoint, I would add the.
Maybe the one thing that's changed is Salesforce does have the technically have a right to compete with us in the pharma CRM space are we did terminate we announced terminating our agreement with them.
Language in the contract which gives them right.
I guess, maybe that's a little bit of a difference but.
The reality is I guess, maybe the bigger picture is the space need pharma CRM, where there were the market leader in this space for a reason we've invested a lot in building a very very deep industry specific applications.
And I haven't seen any competitor any company really go down that path Nobody is fair and nobody's really even close to that so we continue to focus on customer success, continuing to innovate and really enabling that very deep functionality for the industry. So pleased where the competitive environment is.
Thanks, that's helpful and just as a follow up to that.
The wins in the quarter, particularly the competitive wins were those in North America, and Europe , where most of those.
Latin America Asia, where.
Yeah.
Youre still muscle.
Muscling out local players.
Most of them were in North America, there were a couple in your one or two I believe in Europe .
But the majority were in North America and these are most of them are also companies commercializing for the first time there were a couple of competitive displacements that we have some companies that had existing products like <unk> and we replace them.
So it's a bit of a mix, but biased more towards the U S market.
Thank you. Your next question comes from the line of Julian dressing.
<unk> Securities. Please go ahead.
Thank you and thanks for taking my questions I wanted to go back to discussion around the macro environment in your prepared remarks, you called out the funding environment continuing to put pressure on project scrutiny can you provide a little bit more color. There what kind of projects that are being scrutinized is it across the board are specific to a certain type of solutions are you seeing this.
Just getting.
Pushed out to later date or getting canceled and what does the guidance assume in terms of these targets going through.
Yeah. So.
So we haven't seen any real changes in the last 90 days, we if you compare with two years ago for example.
Funding environment is tighter and it's not as easy for small biotechs to get funding at the valuations that they want.
<unk> project scrutiny is tighter and it's not as easy.
For large companies to justify spending for the future because they are little more apprehensive about the curve.
So, but nothing that has changed in the last 90 days and it's been included in our guidance, yes, specifically, how does that project scrutiny play out.
Honestly it just extra extra scrutiny lets say theyre going to it doesn't depend on product area. It could be in the quality area in the CRM area the safety in the regulatory area.
And there's just extra scrutiny. This project is going to be done how much is the budget for this project.
When is the ROI going to happen for our company and just double check that now.
With that project scrutiny, we do our projects generally do pretty well on that what has not done well as companies that focus on more discretionary spend or more.
Just one off project type of stuff that doesn't do that doesn't do well and you see a lot of those companies, having having more or issues, but ours are our projects or investment in core capabilities that people need for the long term and those those tend to be a little more thoughtful and go through.
I would say is to put a clear point of that experimentation, there's less experimentation going on now.
Then there was two.
Two years ago, and that's due to more scrutiny.
Okay that makes sense and then a quick follow up on the normalized billings quarterly cadence now kind of we can calculate what the growth is for implied in Q <unk> fiscal Q3 number can you remind us on the drivers behind the growth exploration you expect from what you're expecting Q2 fiscal quarter.
Thought to Q3 and of course that we had talked about Q4, but just curious like if you can remind us on the growth drag was four four buildings in second half.
Yes, sure and so yes. So we have provided normalized billings to try to take some of the noise out of the equation for you.
The anchor on a full year basis, we increased our number by $5 million. So thats growth of about 15%. So real pleased with the execution there specifically to Q3, what you've seen in some of our newer business. The underlying renewal base has shifted a bit so it was.
Shifting away from the first half more to the back half Q3, Q4. So that's part of why you're seeing an acceleration in the billings growth also the price increase CPI will start to come into play in Q3 and Q4 as well. So those are a couple of the contributors and why we are confident the acceleration in the back half of the year.
Thank you. Your next question comes from the line of Circuit Kalia of Barclays. Please go ahead.
Okay, Great Hey, guys. Thanks for taking my questions here.
Peter maybe for you I was wondering if you could just talk a little bit about the clinical data management business, a little bit and maybe specifically.
Whether you think some of the placements, which have been great by the way I think of the six of the top 20.
I wonder if some of those displacements are adding more value.
And potentially higher revenue run rates.
Then what customers are paying for before.
Does that sort of makes sense or do you feel like do you feel like Viva EDC is kind of replacing what a customer had before kind of one for one or do you find that that Viva is able to add more value and maybe command a little bit more.
Yes, I think we're able to add more value because we're modernizing. So if you look in the clinical data management area. One of the core areas that are our EDC or electronic data capture we're able to customers are able to build their clinical studies faster so that means getting the clinical studies.
Going faster there.
Being able to do there amendments to studies without downtime without data on mode. So that means they can work better with the clinical research side. Those are just a couple of the examples so.
It's a better system that helps them with their efficiency in terms of what they pay for it.
I think they probably pay us.
Actually a little bit less usually.
<unk> customers are all over the map with the different competitors, but maybe on the average they pay us a little bit less but I think the cost is significantly less because they have to put less people manpower on it. So we've always wanted to do that we want to.
We deliver more value at a lower price, we want to innovate and make things better more efficient.
We wanted to share some and some of that return, but the customer the industry get some of that return.
And then if you.
And the clinical data area, one point I wanted to bring up.
We have two top 20 customers now that have our clinical data management and our safety product only too.
Only one of them is live with folks who just recently.
Now what we will do here over the next 12 months to develop highly efficient integration between those systems highly efficient and the standardized integration at the business process level.
The industry hasn't seen that before because no company has had both of those systems clinical data management and the drug safety system.
That efficiency the customers are just going to kind of get in that's going to make the industry just much much more efficient. So that's what we always wanted to do charge less deliver more and run a real profitable business.
Yeah, absolutely it shows Brent maybe maybe for my follow up for you very helpful answer by the way before just on on on on the billings acceleration in the second half I have a little bit more of a mechanical question, which was just the normalized billings and calculated billings I think there was a minor difference between the two before now we're thinking about them being roughly equal just that.
Just for own sort of edification can you just go one level deeper into what changed if anything around your expectations on billings terms that that maybe make both of those now a little bit a little bit more similar than what you were thinking before.
Yes happy to so first what do we normalize so what we're normalizing as for our renewal business. If there's a change in frequency or a co term. So we have a view entering the year or what that's going to look like for the full year. So once we got into Q1, there were a few customers where they had change in billing terms, so basically those new.
<unk> offset what we thought before so on a full year basis.
No.
Calculated billings at normalized billings are one and the same youre going to have differences quarter to quarter, but for the full year it nets out.
Again, if you'd like to ask a question press Star then the number one on your telephone keypad.
Your next question comes from the line of Stephanie Davis of SV B Securities. Please go ahead.
Hi, guys. Thank you for taking my question.
I just wanted to follow up on the sales force question. Thank you had a little bit earlier.
Asked another way what is feedback been so far from your client base about the transition off of the platform and engineered.
With platform.
Is it appearing on the radar yet.
Okay.
Yes, I mean, it is a topic of conversation certainly with our larger customers.
The global customers companies and large enterprise. They are focused on this this is something that they know they're going to have to do so at some point and focus on over the next several years remember our customers after 2030, but for some of these large companies.
There is a big deal if I have to make sure that they plan and think about this so we're working very closely.
With all of our large customers to help them understand the implications what it means for them.
So the benefit that they get out of that so I think theres a lot of.
The last six months was about understanding what does this mean.
And the rationale.
I think the summit helped with that having them see and understand that it's real and understanding that.
There is a path forward.
A new level of innovation for them now they are certainly going to be work to do to get there our customers will have to.
This will be projects for our customers. It's on us to make sure that we minimize the size of that and certainly relative to doing some other alternative.
Alright, it doesn't really exist in the market today this will be a whole lot easier.
That's how we're thinking about it theyre, helping last six months was about.
Testing and understanding and narrow appreciating some of the innovation, we're going to deliver over time.
And then just a quick follow up on billings, you had the $554 million in normalized billings this quarter.
Could you kind of parse out the Unbilled Rahim both take down benefit.
<unk> from some of the new clients that you called out and how are you bridging that growth rate can be the acceleration in the second okay. Thank you for that.
Yes, so if we kind of maybe just break it down to what happened in Q1. So from a Q1 perspective, we had a nice beat and <unk>.
A portion of that was.
From more annual builders than we expected and then part of it was the underlying strength in the business. So we flowed that through the on the Unbilled AR that T for C.
That question you are asking me had no impact on how we look at the full year normalized billings.
So theres not a direct impact there.
Awesome. Thanks, Okay.
Sure.
Thank you. Your next question comes from the line of Tyler Radke of Citi. Please go ahead.
Yes, thanks for taking the question.
I wanted to come back to the Compass suite it sounds like Youre expecting some customers next year at your Youre summit to be.
<unk> rolled out on that product does that is that going to be kind of net new customers similar to the.
The ones you referenced in terms of adopting the vault CRM suite or are you actively engaging customers, who look to be displacing <unk>.
And rolling out on the Compass suite.
I think it will be a mix and maybe mix.
A particular brand maybe for a patient product.
In the large customer it could be in that top 20.
Or a full replacement sort of being IQ via free that will come from.
A small customer whether they are existing or brand new customers that will come from Merck accompany that sort of maybe has one brand where theyre just pre commercial not quite ready to launch.
That'll that'll be the pattern, which is very similar to what we see in many of our products easier for a smaller more nimble company.
To just go all in with Viva.
Got it that's helpful and then on the R&D side, you talked about a lot of nice wins in EDC.
The broader clinical suite I was wondering if you could just talk about the trends youre seeing in CD MFS.
And I believe you have had some.
Product and sales leadership departures on the R&D side, but just just kind of help us understand how you're adapting.
Adapting to some of the changes in and just given the <unk> tends to be longer sales cycles, just how how customers are thinking about that in the current environment.
Yes, it's going very well and the clinical data management area.
Yeah.
What I mentioned in my prepared remarks is actually not a new deal theyre. So much as a customer that went live in six months.
Our top 20 customers that went by.
Six months on our core ADC product, that's kind of for all of us cutting so that's kind of unheard of that Super Super fast.
That's the thing that many customers generally would do.
12 months 18 months, even two years so.
I think that's going to generate its own its own kind of momentum.
Especially we have our R&D summit coming up in the fall that customer will be talking there about what they did.
So I'm really pleased with that and the competitive environment is actually quite benign. It's not it's not moving if you look at the competitive environment. It's not it's not moved since we entered into it now.
Now that's just with our core.
Our EDC product, we also call that CD mix, but thats a core electronic data capture we're also starting to make early progress in our other areas randomization and trial supply management person person and big area as well and then the April pay.
Patient reported outcomes, that's a big area as well and there's never been a company that has been a leader in all of those three categories before.
I think we're set out to do that over time.
Sort of what Viva does make integrated suite of products. That's all great and the fact is in the clinical data management area. There's never been a company that has accomplished that.
While I'm very excited about our ADC product progress. That's that's just getting started clinical data management.
Thank you. Your next question comes from line of Charles <unk> of TD Cowen. Please go ahead.
Yes, thanks for taking the question.
Peter.
I think you guys mentioned cross X briefly then it kind of contribute to revenue growth. If I recall. This is one that you've called out.
In the past.
Youre talking about the environment being tough, maybe causing some slowing growth in the near term.
Can you give us an update here.
The environment improved at all.
For Cross X, maybe give us a little bit more detail there.
Yes. This is Brian I'll take that question. So overall, we've talked about the macro over the last 90 days Hasnt changed and Thats applicable for caustic as well. It was one of the areas in the back half of last year that had a little bit more of the headwinds with marketing budgets. So it is still.
Is that unchanged state. So it's still a very exciting business for us with a lot of very very strategic and meaningful to our customer base. So we're excited about the opportunity, but but no change in the macro.
Okay, and then Brian maybe just a follow up.
And the guidance Youre, implying a step up in the operating margins.
Call. It 30 34 ish percent.
You had these summits and kick off can you give us a little bit more sense for the mix in the Opex lines that we should kind of expect I would imagine <unk> sales and marketing steps up in the second quarter, maybe just give us a little sense for the cadence that we should think about sort of the various opex lines.
Yes, it's kind of I mean, it's going to flow through through the course of the year because things that we have sold kickoff in one quarter will have a commercial summit in another quarter and R&D summit in a different quarter. So I don't think I would try to over over model that think about that as an incremental step up overall for the year and it's relatively smooth Q1 was the.
I'll kick off that would be one example, where it's a little bit larger.
Okay.
Perfect. Thank you.
Sure no problem.
Your next question comes from the line of Stan bearings.
Bernstein of Wells Fargo Securities. Please go ahead.
Hi, Thanks for taking my questions maybe.
Maybe just revisiting the EDC win.
Announced.
I'm just curious.
They provide any feedback as to why they switched away from their legacy provider and can you share with us who their legacy PDC when there was.
I should say.
Yes, so I wouldnt comment in general we're always replacing one of the two main incumbents.
Large systems that would be Medidata, Oracle and we replaced both of those.
And.
The case for change is really around modernization.
It's around modern modernization better customer relationship.
Modern as a nation would be around.
A better application better experience for the clinical research sites faster to go to clinical research study.
If you do a change of a clinical research study.
And then also the ability.
Viva has clinical operations suite as well as the clinical data management suite, and we deliver maintain and update upgrade that integration between those two things. So we completely take that burden on for the customer.
So that's what it is it's not that complicated more modern.
Better service and more integrated because we have the clinical operations suite.
Okay, and then maybe a quick one on commercial.
Can you give us any updates on cross connects are you seeing any changes in the growth rates, there and any updates on global pharma sales rep numbers.
Okay.
Classics I'll take that one and then Paul maybe the.
On the sales reps number cross inks business continues on it'll have its up and ups and downs quarter by quarter, because it's related to marketing spend and campaigns and that that can go up and down a little bit so in that way, it's a little bit more like our professional services business. The directions, we're taking cross ex us.
To use it to cross <unk> and our CRM system integrate them more tightly together going forward Theyre integrated now integrated more tightly more bi directionally to help integrate sales and marketing at our customer sites and that's that's something they're really excited about and remember the process.
That's the same core data platform that we use to leverage to build the company as well.
Committed to cross it and excited to cross six and looking forward to converting more of our customers to enterprise license agreements over time.
That will then smooth out some of that up and down in the quarter.
And then in terms of the pharmaceutical sales reps Paul.
Yes, I'll give you an update there.
And returns are the reductions.
The majority of the reductions have already played out through the system.
And I expect when it's all said and done it'll end up being slightly less than 10%.
Initially had projected and talked about we did see very slight reductions in the quarter roughly in line with what we had anticipated.
Thank you. Your next question comes from the line of Natalie How of Bank of America. Please go ahead.
Thanks for taking my question. So early you touched a bit on Viva quality and in the press release, you mentioned that you must won a top 20 pharma.
<unk> segment seems to have a pretty large opportunity.
Can you talk a bit more on what has been driving the strength in that category and expand a bit more on how you're really going to capture the opportunity there. Thank you.
Yes, we have quality is a big area for us so in that quality suite have quality docs, which is the quality.
Documentation management standard operating procedures things like that we have the quality management system.
Managing quality events deviations things called Cat loads and we also have training in there.
Okay.
Then we also announced Lynn's our laboratory information system for manufacturing and our validation products.
Computer systems and other validation and then also we have.
What's called learn DXP, which is our learning content for quality.
It's a very it's a very big area and Thats never been available from from one vendor before.
Paul on a unified data model.
That form so Pat.
That's what we have is quite unique we set out to build that.
The early plans of doing that or roughly 10 years ago and it takes a long time to execute on that.
Excited what's fueling the momentum there is customer success first of all these systems are not things you changed out easily or lightly long implementations and we don't do it unless you need to do it so each customer has their own timeframe when their existing systems are running out of gas.
I would say, they're not investing much these days in their legacy systems, because there is broad awareness that Steve is probably a better alternative.
Do you get to feeling now for most customers.
They think there probably will be going to veeva for our core established products training quality docs Qos.
And the question is when.
And then there's a lot of wait and see about our new products validation than lens pays that product can be real I don't want to be first.
Let's get that going.
So that's how it is it's a long long replacement cycle. When we talk about a long runway for growth ahead. Those are the types of things the seeds, we planted in things like limits, but we don't even have our first customer.
<unk>, where we just have a few customers compass, we have nobody on patient and prescriber.
Our safety, we have more to build out in our safety suite.
That's why I say long runway of growth and there is no magic to it is driven by customer success.
Thank you there are no further questions at this time.
I would like to turn the call back to Peter Gassner for closing remarks. Please go ahead.
Alright, Thank you everyone for joining the call today and thank you to our customers for your continued partnership and to the Viva team for really an outstanding work in this quarter. Thank you.
Okay.
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