Q3 2024 Veeva Systems Inc Earnings Call
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Speaker 2: Good day. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to Viva Systems Fiscal 2024 Third Quarter Results Conference.
Good day my name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to Veeva Systems' fiscal 'twenty 'twenty four third quarter results conference call.
Speaker 2: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star one. Thank you. I will now turn the conference over to Gunnar Hansen, Director, Investor Relations. Gunnar, you may begin your conference.
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 that time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question again press Star one.
I will now turn the conference over to Gunnar Hansen Director Investor Relations Gunnar you May begin your conference.
Speaker 3: Good afternoon and welcome to VIVA's fiscal 2024 third quarter earnings conference call for the quarter ended October 31st, 2023, as a reminder, we posted prepared remarks on VIVA's investor relations website just after 1 PM Pacific today. We hope you have had a chance to read them before the call.
Good afternoon, welcome to <unk> fiscal 2024 third quarter earnings conference call for the quarter ended October 31, 2023, as a reminder, we've posted prepared remarks on <unk> Investor Relations website, just after one PM Pacific today, We hope you have had a chance to read them before the call.
Speaker 3: Today's call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer, Paul Shawa, EBP Commercial Strategy, and Brent Billman, our Chief Financial Officer.
Today's call will be used primarily for Q&A.
With me today for Q&A are Peter Gassner, our Chief Executive Officer, Paul Shallower EVP commercial strategy, and Brett <unk>, our Chief Financial Officer.
Speaker 3: 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.
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.
Speaker 3: 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.
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.
Speaker 3: Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q .
Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q.
Speaker 3: Forward-looking statements made during the call are being made as of today, December 6, 2023, based on the facts available to us today. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. VBID disclaims any obligation to update or revise any forward-looking statement.
Forward looking statements made during the call are being made as of today December six 2023 based on the facts available to us today at.
This call is replayed or viewed after today the information 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 now 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 measures can be found in today's earnings release and in the supplemental investor presentation, both of which are available on our website.
Thank you for joining us and I'll turn the call over to Peter.
Thank you Peter and welcome everyone to the call.
Speaker 4: We had a solid Q3 with revenue and operating income ahead of guidance, including total revenue of $617 million and non-GAAP operating income of $235 million.
We had a solid Q3 with revenue and operating income ahead of guidance, including total revenue of $617 million and non-GAAP operating income up $235 million.
Speaker 4: As I shared in our prepared remarks, we had a number of great milestones and new product announcements in the quarter as we progressed in building our industry cloud for life.
As I shared in our prepared remarks, we had a number of great milestones of new product announcements in the quarter as we progressed in building our industry cloud for life Sciences.
Speaker 4: With the growing set of high-value applications, data, and services in R&D and commercial, we can help the industry become more efficient and effective across the even broader range of areas.
The growing set of high value applications data and services and R&D and commercial we can help the industry become more efficient and effective across the even broader range of areas.
Speaker 4: We have a significant opportunity ahead, and with a focus on product excellence and customer success, we're becoming an essential strategic partner to the industry. Now we'll open up.
We have a significant opportunity ahead and with a focus on product excellence in customer success, we're becoming an essential strategic partner to the industry.
Now we will open up the call to your questions.
If you would like to ask a question. Please press star one on your telephone keypad, we do ask that you limit yourself to one question and one follow up.
Your first question comes from the line of Ken Wong from Oppenheimer. Please go ahead.
Fantastic.
My first question is for Peter maybe Paul.
Investor Day, you guys talked about getting an emotional commitment from from customers to move over to volt CRM. It looks like you got two written now maybe give us some color into what went into that decision making process for these for these large enterprises and what kind of signal do you think this might send to the rest of the industry that.
Or potentially looking at bolt CRM.
Hey, Ken Thanks for the question. This is Paul Yes, So we're super excited about buyer and GSK, probably everybody on the call may have seen the press releases, but we also have them joining us during the keynote and on the main.
Stage at Europe, stomach, which was last week.
Super exciting so essentially answered your question on the main stage, which was why did they select Paul CRM.
And it came for them it came down to something very similar which was innovation.
We're thinking about the future.
We are excited about the next generation CRM and for them.
Ian I'll paraphrase, what GSK said, because you said it very concisely is this idea that yes.
Farmers CRM is not a commodity but it's a small problem thanks to veeva.
And with what that means is.
This is something Thats very hard it's difficult, it's something that they've done multiple CRM implementations in the past and it's not something they want to spend any energy they want a solution that works.
And that's proven and they want to be able to innovate and look forward.
So that in a nutshell is the reason it's innovation. It's looking forward. It's building for the future. So we're super excited to have both buyer and GSK talk about their selection.
Got it and then a follow up for you Brent just as we look at the <unk>.
Billings number four for the year, you guys trimmed at $40 million any way to help US segment, how much of that might be the services piece. The FX piece and I think you've kind of mentioned there is a little bit of.
Maybe some combination of duration and timing involved but would just love to kind of understand what the moving pieces are that got you to that 40.
Yes happy to Ken So about half of it is related to services. So the services reduction that we talked about on Investor day. The balance of it is really split into a couple of buckets one is.
The proportion of quarterly biller versus annual billings, and our new business. So we had a higher mix of quarterly pillars that we expected and then the other portion of that.
As related to.
Timing of deals. So some deals we expected to close in the Q4 timeframe now it's going to be early.
Full year 2005, and then to a smaller extent there.
Some FX headwinds as well so relative to our prior expectations. So those are the pieces of it.
The biggest portion of it was Kelly services.
Okay perfect. Thank you.
Sure.
Your next question comes from the line of Brian Peterson from Raymond James. Please go ahead.
Hi, guys. Thanks for taking the question. So I'll start with Brett I think there's been some debate in the past on how the services business correlates to subscription.
Is that a leading indicator or not I've got that.
Questions for investors. So I'd love any perspective, you have on how we should think about the correlation between subscription and services.
Yes services, Yes, Hey, Brian services is not a leading indicator and there's a number of reasons or is the timing of deals theres product requirements are different between the type of product you are buying customer specific requirements. So that's not going to be a good leading indicator and then on the subscription side, yet things like ramping deal.
And pricing and the like so theres a number of reasons why.
Those two don't directly correlate and you Shouldnt think of it that way.
Great and maybe just as.
A follow up on the marketing automation side I thought that was an interesting part of the product announcements out at the Investor Day, how do we think about the ramp of that product and any early feedback or thought process on what your customers are using today. Thanks guys.
Okay.
I'll take that one yeah, a little we will start the development of that next year in 2024.
So I think thats something youre seeing from Veeva as a strategic partner, we have a lot of products across R&D and commercial data software and services. So we're very strategic partner to our customers. So in general once we know we're going to do something we let our customers know that.
They can do long range planning around that so in this case you saw us announce that before before we established a development team for example for it. So it's very very early and too early to say what that revenue ramp would be in terms of what most of our customers are using they might use salesforce dot com marketing cloud they might.
These products from Adobe.
Some of the smaller customers, who will outsource this to agencies, but those are probably the those are the predominant products are used.
Thank you.
Your next question comes from the line of Joe <unk> from Baird. Please go ahead.
Great Hi, everyone.
Years past just in this <unk> period, I think visa has had a fair amount of visibility and inclination just on the upcoming year because of where our big pharma customers stand in their budgeting.
Process I am wondering if you could maybe compare current visibility on that FY 'twenty five revenue target versus what's been the case over recent history.
Related to that topic.
Brian you're calling out some variables on just the billings in the SCR.
Some of those things you called out maybe start to influence the puts and takes going on.
2025.
Hey, Joe So we reiterated.
The $2 75 billion.
And the visibility we have.
Every day you move forward, you got better visibility and we have no less visibility than we had a year ago. So similar as we look out in front of us and some things that to contemplate as we have some multi year ramping deals that will contribute.
A larger amount next year, that's something that comes into play, but we have a long runway for growth our visibility is not less than it has been historically it takes at least as good and we're confident in our ability to execute to the number.
That's great. Thanks, and then I wanted to ask the outlook for the commercial segment, it's gone up more than I expected over the course of this year.
And then my prepared remarks, I think you are referencing commercial content and link so kind of a barbell on that very mature product growing nicely and it's still very early product is growing nicely.
There is.
Understandably been a lot of focus on CRM worldwide, but how would you kind of frame performance from the non CRM piece of commercial and kind of what youre seeing in markets. So far to drive what seems like it's been upside to your original forecast.
Yes, Joe it's Brent I'll take that one as well so yes, we have.
Kris that commercial numbers through the course of the year end.
You put it quite nicely and that is a combination of our more established products continuing to contribute revenue.
Revenue growth by content and in our newer products like link really kicking in nicely and we're still very early days there and then the data products I think we saw in <unk>.
Prepared remarks, really coming along nicely, we're very early days, but we're optimistic in a very long journey. There. So those are the things that we think about and prospects is another one that's contributing.
And nicely as well to our growth.
That's great. Thank you very much.
Your next question comes from the line of Dylan Becker from William Blair. Please go ahead.
Hey, guys, maybe Kim on the theme of data here as well Brent you just called out Compass, maybe for Paul on that side Theres, a lot of new customer momentum I know, we're releasing some new offerings. There early next year, but how do you think about that enthusiasm maybe kind of validating the strategy and.
Some of the encouraging momentum from customers around that strategy as we think about that upcoming opportunity I know, it's it's beyond 2024, but as we think about kind of the going are having that kind of full suite as we think about early next year.
Yes so.
It is great validation of what we're doing we have we're excited about.
Very clear product strategy with what we're doing in data more broadly overall with data cloud. We're building a modern data platform Compass is a key part of that we started with patient data we did announce the.
The expansion of that portfolio at the beginning part of next year with prescriber national So with with those three products encompass.
We are well positioned to be the standard data provider for even the very largest of pharma companies.
The momentum that you saw in the quarter is a good indicator for us it's a good indicator that new customers are.
Starting in Trialing.
Data products, but that existing customers are expanding where we started with one brand and then we expand to an additional brands. So it is in fact.
Validation of our product strategy, our commitment to getting the product excellence. So we're on the right pathway with compass, we feel good about that.
Got it and then maybe for Peter too right. As you think about that evolution of data cloud to R&D, obviously, a lot of kind of pertinent use cases, there, but how do you think about that data standardization playing in.
Can you kind of workflow or process standard standardization.
Standardization of some of the momentum you see in that clinical suite today, and maybe what the value can accrue from having kind of both the connected workflow and standardize data as we think about development life cycles as well thanks.
Yes, I'm really excited about how about that.
I think our clinical opportunity and data can be as large or may be larger than our commercial one it really can be large now we're much earlier, so that ethanol will be proven out and there's a very strong very strong synergy between our software and clinical and the data products that we can build it.
Look at the Big picture I think visa has been working pretty hard at cleaning up the software side of life Sciences over the last 15 years and.
We've made a lot of progress still more to go with adoption, but we've clearly got a great footprint for it.
Now with data cloud icf's cleaning up the industry data and harmonizing the industry data.
And then we'll make our data and software work very well together.
So that's really what we're talking about it.
For the industry cloud.
Digital transformation, which is softer.
Software and data all working together.
I'm very excited about it.
I think the special sauce on the clinical side is.
The clinical data on its own is not as valuable as the clinical data that can work with clinical software and.
I think we're going to revolutionize that area. It was just.
It takes some time.
Great. Thank you.
Your next question comes from the line of Ryan Macdonald from Needham and company. Please go ahead.
Hi, Thanks for taking my questions, maybe first one for Brent.
About hiring fewer people in the quarter and as we just look out into next year, what areas might you be adding still and how youre thinking about the hiring environment or hiring plan given that we're starting now to see more and more companies right sized our organization structure heading into next year again. Thanks.
Yes, so overall, our hiring strategy hasn't hasn't changed we're focused on hiring for growth.
We're going to focus on areas, where we can drive customer success and innovation. So that's always been our approach and we're going to do it in a disciplined way you saw in Q3, we had a lower hiring quarter than you have seen in our recent past in la.
Looking out to the balance of fiscal year 'twenty four it's reasonable to expect that lower high rate continues.
I'm not going to get into fiscal year 'twenty five at this point in 90 days, we will provide our traditional metrics, which would include operating income and margin and then obviously head count would be factored into that.
Super helpful. I appreciate the color Peter maybe just a follow up for you you talked about in the in the prepared remarks about some of the newer clinical data products from CDB Archea, Sam E Pro and at your Analyst Day, you talked about how does this really expands the tam within that area as you.
Spark start to speak with customers or prospective customers about some of these newer products.
What sort of appetite are you seeing for from those customers around development or co development on some of these newer areas and sort of willingness to make some of those earlier investments with you in innovation on the product roadmap.
Amidst the evolving environment. Thanks.
Yeah, Great question about the clinical data software you have.
ADC, which is the core but the first thing and then you have others CBB have we have the training.
Have a pro and our TSM.
Customers are generally going to be very conservative in that area. So really we have to innovate first and then they will come come along because this is these are there studies right and they are planning studies for a long time. So there is going to be pretty pretty conservative. So I think it's an area that that start slowly.
But then it for the same reason why it starts slowly and then develop momentum that customers end up having something that they really like boy well they stick with it and right now the industry is not well served if you look at the sort of I would say that.
Professionalism of the pro applications out there, where the artists them applications out there.
The level of professionalism.
<unk> of what Viva is doing.
Our products are getting there. So that's one thing which is both the product and the services and then I think the real copper is the integration process integration for example between our Rts Seminar April.
Had a discussion last week with the with some clinical leaders at a top 20 pharma and when we were discussing.
The integration that we will do between our our TSM and our ADC and how that will affect the pre screening screening process and the ability to get patients into the right trials.
This can be transformational.
Some cases when that workflow breaks down you might lose six months exclusivity on a blockbuster product because of the delay of a.
Pivotal trial, that's money you never get back so that's the criticality of these systems and it causes a little bit of conservatism.
Alright, well, so I might use your art TSM, who else is using your or TSM for all of your studies well nobody has yet you can be first Oh, hey, I'll just I'll.
Wait and see on that so it's that type of thing.
Hard to get in there really hard to get out if youre doing a good job.
I appreciate the color helpful anecdote. Thanks.
Okay.
Your next question comes from the line of Jack Wallace from Guggenheim Securities. Please go ahead.
Thanks again for taking my questions.
Just wanted to ask about compass.
The event around.
Clients migrating to the vault CRM platform.
Much of the comp has come up as a logical upsell here and is it fair to think about the migration of that being a natural.
Upselling opportunity.
Okay.
Question to ask about campus in Baltimore, I would say, they're not the same at all they're quite disconnected compass in many ways is a much more strategic.
Because that's that really affects how you apply your resources and complex, where we're reinventing how you can do data.
Much more strategic decision.
Related to analytics and its purchased at the brand level for Brian brand analytics. So it has these dynamics also for example campuses.
Something we sell to companies that are two years, sometimes away from having a field force theyre doing their planning involve their market potential.
It's quite disconnected versus square CRM is hey, now you are ready to launch.
You just need a system with the full functionality fever, that's kind of a solved problem. So theyre veeva CRM playing into that on campus sits well gosh, we have been using <unk> for 20 years, you are coming with a different approach well hey.
So were they are really out of phase and they don't depend on each other now it's nice to have multiple products to be able to bring into a customer and so you can provide the full commercial solution Veeva CRM commercial content Cross six for your media measurement link for your deep data campus. So we have a lot.
Things that can fit together and especially for a smaller company they will look for that partner.
I need to get all of this in a hurry.
But in general those things arent linked together and I wouldn't view bought CRM as a catalyst for compass catalyst for Compass is gonna be its product excellence and how well we do on our launch of prescriber and nationally in January.
Yes. Thank you that's helpful and then one for brand around billings just to.
Put a bow around the.
The change in terms and cadence of billings.
Help me with the math here, if we had a $12 million headwind in the third quarter does that mean about $6 million of billings from the third quarter slipped into the first half of next year and then.
Is that number say six to nine from the fourth sub add it all up $12 million to $15 million or so that just due to billing cadence got pushed into 'twenty five.
Yes, im not going to break down that to the specific numbers, but I can give you like the directional numbers around this so I said about half of services.
And then there is the duration piece of it right. So then the balance is split pretty much between two buckets with a little bit of FX. So that duration piece. That's that's just a matter of overtime when is that going to when it's going to bill. So we have more quarterly builders.
<unk>.
We expected for our new business, so that's about 25% ish of.
The residual and then the other piece was literally the timing of appeals against some of that was deals.
That pushed out from the back half of the year into the first part of the year. So that's at the high level how to break down the buckets.
And that's been contemplated in our 2750 revenue number.
For fiscal year 'twenty five.
Got it thank you.
Sure.
Your next question comes from the line of Dan Bernstein from Wells Fargo Securities. Please go ahead.
Hi, Thanks for taking my questions first.
First Peter Paul in the prepared remarks. It was mentioned you had solid bookings on their prospects, including brand expansions I recall that prospects has seen some choppy demand the prior quarters as the reinsurers that youre seeing a pickup of activity on this front.
I guess there. The reasons are some is just timing how things laid out also just solid execution by the <unk> on the product and on the sales and marketing and I think some.
Some of our competitors also last year's sort of maybe oversold, what they could actually deliver so we had a few potential square the customers last year went for some things because they were promised quite a few things actually a delivery didn't didn't match and so they they in some cases.
Then came back to cross <unk> in some cases.
Hey.
Went to cross for the first time so.
The solid execution and some timing.
Got it and then maybe one for Brian.
Services gross margin in the quarter I think was the highest in eight quarters or so is there anything to call out here, besides hiring and how should we think about the progression going forward. Thanks.
Yeah, we're fucking up from quarter to quarter Youre going to see vacillation in services margins. If you look forward in Q4, Q4 is a lower margin quarter because of holidays and you have less days to be utilized but we're always going to focus on having the right amount of.
Capacity to address the service demand we happen.
We did a nice job of executing to that in Q3, and you saw a little bit higher.
Service margin in the quarter.
The range of margins you've seen over the last four to eight quarters, that's probably a reasonable amount to think about we're not looking to maximize it to 50% or anything like that.
Your next question comes from the line of David Windley from Jefferies. Please go ahead.
Hi, good evening, Thanks for taking my question.
I'm a company so it was.
Backdrop pharma companies.
I've been trying to move quite a bit.
Commercial excuse me commercial insights deeper into a clinical development stage.
Stages of their R&D.
Veeva is unique.
And it's span of solutions across clinical and commercial.
Im wondering how much you think about the integration.
Of those solutions across clinical and commercial to drive stickiness of Veeva solutions.
How important is the transition of vault.
That effort and how important is data in that effort.
Thank you.
Peter I'll take that one I would say the most important thing that veeva can deliver in that area is data.
On a common data platform, so enabling pharma companies to have a common data architecture across specifically commercial and clinical so talk about product classes in the same way disease areas therapeutic areas in the same way and so I have a common vocabulary and common source of truth to the data.
On both sides and to be able to interact with key opinion leaders. The same view of commercial key opinion leader with the.
With our clinical key opinion leader, that's a key thing.
Most important thing that neither can do and I think we are.
We're really the only ones that are setting out to do that.
The second one is enabling the process flow between.
Commercial and clinical so the connection between for example, our <unk> system and our CRM system that's useful.
And then maybe potentially that did that.
Biggest barrier is process inside of pharmaceutical companies do they have processes do they have operating models do they have responsibility for enabling that flow.
Our business consulting can really help there, especially as we're building up our business consulting and clinical I think we're gonna be experts at.
Helping companies with their business process, because you're right I do.
Neil and I know most executives of large pharmaceutical companies feel that theres lost value because their integration process integration between commercial and clinical it's not worth it.
Thank you for that.
Sorry, I just wanted to see one more I don't I think you can't do that if you're not looking at economy over the data.
We won't be able to accomplish it that's not sufficient to make that connection happen, but I don't but I think it's necessary to make it happen.
That's great. Thank you.
As a follow up on a different topic just in thinking about.
Pipeline funnel discussions for you in your sales team.
You've talked over multiple quarters as have others in life Sciences talked about slower decision, making.
Budget scrutiny you mentioned in your prepared remarks I array.
Could you shed.
You haven't talked about it before but give us the most updated view on how.
How these kind of macroeconomic and IRA IRA related effects are affecting decision, making and do you feel like that is getting worse or getting better. Thank you.
Yeah in terms of the interest rates higher.
Global conflicts.
Over the last 60 days I don't view, it as getting worse or better per se, it's kind of staying stable.
It does result in questioning on decision making conservatism.
It's kind of a damper on innovation for small biotechs, who are hey, maybe I'm going to start up a biotech company I need to raise funding maybe I can't get funding now so I don't start that up I don't I don't create create that research. So that's a little bit camera.
One of the things that has been happening through Covid and this downturn is some some deferral of veeva.
Veeva is a lot of the things we do our core capabilities you are trying to modernize your core capabilities during COVID-19, sometimes they had other priorities when there's uncertainly like conflict interest rates et cetera interest rates et cetera, okay compared to shift a little bit I do feel there is more deferred maintenance building up especially in the.
Sure.
Sort of top 100 life sciences companies more deferred modernization of systems that.
That's going to have to be taken care of over the next two.
234 years, so I think there is some some demand starting.
To get pent up.
That's great. Thank you.
Your next question comes from the line of Tyler Radke. Please go ahead.
Thanks for taking the question and I apologize if you covered this I have been jumping around a few earnings calls Tonight, but.
Wanted to touch on the top 20 pharma is that you did migrate over to bolt CRM.
I'm just curious post that announcement.
What's the interest in.
Conversation spin with others and then if you could just share any.
Milestones or other.
Goals that you have in terms of the number of farmers that you hope to have call.
Call it over the next few quarters or years.
Okay.
Yeah, Hey, Tyler this is Paul.
Yes, so in terms of.
You mentioned kind of migrations. These companies have announced our selection to migration will follow so they'll do a little bit of services work next year, but you can think of their migration starting in 2025. That's when we are we'll have early customers next year, you can think about that as a milestone we will have some early customers.
Go through the migration process with us and treat it like an early adopter program like we do with any other product. So that's what we'll use next year for them in 2025 will be ready to scale.
So that's what's next for these companies they have announced their selection and they want to be able to communicate that internally and aligning their organization on what their go forward strategy is that's really important for them to get organized and focused and aligned to where they've shifted from decision mode to execution mode.
Now in terms of other companies.
<unk>.
We are ready when they are right I think this has created some additional urgency.
Our expanded our new commercial cloud has created some additional excitement and energy that moving to the vault platform unlocked a lot of that innovation.
But there is no timeline, we're not forcing our customers to grow in any particular timeline I do expect most will go.
Starting in 2025, but 2026 27, and that's when you'll start to see the majority of customers moving.
Yes.
Chime in there you also a question about momentum our customer summit.
And Europe caused over 1000 people there right.
And buyer, where they're in GSK over there and they speak both in a large session and then smaller executive sessions and then hallway conversations.
Certainly all momentum builder right not only that theyre going to Veeva CRM.
CRM, but why and what was the thought process. Because these companies are kind of leading the charge, but great reference selling there also things like we download we did a concept demo of service center.
For the first time live to the customers there and.
And I think that was very well received so division starts starts to ticket ticket ticket clear and it's building momentum.
Got it and yes, sorry, I Didnt mean migrations that would been impressive as we migrated those customers and weeks I meant more the more of the siding. So so good good to hear the excitement from other customers.
Just as a follow up Brent I know you your favorite topic topic here.
<unk>, but.
I guess two quick clarifications.
Number one as we think about the updated normalized billings guide for this year.
You walked through some of the puts and takes that's driving it down I guess the changes to billings terms.
Invoicing duration.
Wouldn't that be normalized if you will in the normalized billings are.
As the normalization just for TFC, and then I know youre not guiding the billings for FY 'twenty five, but just as we think about the historical relationship between revenue and billings and what does seem to be maybe some modest duration headwinds anything to keep in mind there. Thank you.
Sure on your first part of your question. So what we normalize as we normalize for changes in our renewal base. So if you are an existing customer renewal base, they change frequency or the change duration, we normalize that out so we take the noise out what we do for new business as we do our best effort to model, but we expect that the profile of that new business to come.
And so what you are hearing me say is the expectation we have for new business. There was the actual fact pattern was a bit different. So we have more quarterly biller and that new business than we anticipated we thought we'd have a bit more annual so it's new business not normalized so renewal portion that we do normalize.
And then your second question is we've we contemplated in the billing.
We are exiting fiscal year 'twenty four in our reiterated fiscal year 'twenty total revenue numbers, so $2 75.
So we feel good about our ability to execute against that.
Your next question comes from the line of Gabriela Borges from Goldman Sachs. Please go ahead.
Hi, This is Kelly of Lindsay on for Gabriela, just one from me and going to be again on the on the billings dynamic, but just related to the deals that you talked about being pushed from from the back half of this year into early next year.
Clearly a change versus your initial expectations and I know you said there was nothing incremental in the past 90 days on macro but can you help us reconcile those two comments a little bit.
Yes, I mean youre going to have it.
It's going to be customer by customer right. There is no exact pattern that you can say across the larger cohort in the first half of the year I know if you recall the actual it was that we had favorable linearity. So from period to period, it's going to ebb and flow depending on the specific customer.
Situation, what you bought approvals they require the size and scale and the complexity of the deal so.
It's a continuation of what we've seen sometimes it's in your favor sometimes it's not and that's what we saw.
Thank you.
Thank you.
Your next question comes from the line of Kirk <unk> from Evercore ISI. Please go ahead.
Yeah, Thanks very much.
Paul just theres going be a lot of discussion about migrations over the next couple of years and how should we think about sort of the services work around all this meeting you're going to have a lot of customers, obviously going through the migration process. How do you make sure that there's not sort of a bottleneck from a services perspective, so that and maybe theres just not enough work. So it's not that big of a deal, but I was just kind of curie.
How do you make sure that you have the right customers, especially the big ones are are aligned with either your own services capabilities or your GSI partners.
Talk about that a little bit.
Yes sure in one of the things we're laser focused on right now is making that migration as repeatable as possible and that's going to include some product work that we're doing to automate some of the migration.
But it also includes scaling out the vault CRM and services team and we have people now dedicated and focused to that part of this is focus pays off and this is this is the kind of thing that we think about when we think about executing really well part of our strategy is to to execute really well on this area and we're putting dedicated people on it and that.
Is going to help us create the focus but also the team to expand and scale and support customers.
We know roughly what that timeline looks like so we'll be ready to support it and and I would say the third part of it is enabling our partner ecosystem.
So we are working closely to make sure that.
They know what our role is and they know what their role is and how they can help us on how we can help scale support customers are really across the globe and remember this is the U S to Europe, It's Asia Latam.
So we have a lot of customers and we're going to.
We're making sure that we're ready.
With our own tooling, our services and our partners.
Yeah, Yeah, and you mentioned that.
I had placed.
All the time and they're a little bit one way to think about is that a big big boats to work around Veeva CRM between 2012 and 2017 roughly speaking maybe we will.
Somewhere around half the market a bit less than that from feeble or <unk> or some other things to be this year. I mean that was a big bolus of work that was done by Veeva services, and our partners like Accenture and regional partners.
Over a five year period now.
Now we have this five year period from 2025 years to 2030.
We probably have about as much work to do now we have more movement to do because we have to move 90% of the industry over but the effort is less less than significantly less than half of the of the effort and certainly in the migration that's less than half. So we have mobilized our own services and the partners to do that.
These are the things that.
We know how to do.
That's helpful. Peter Thanks for Dimensionalize that and then Brent.
One more just on <unk> in terms of the duration changes that youre seeing or are these bigger customers that just want to break it up into bite size pieces from a payments perspective smaller customers just trying to save cash right. I was just wondering if there's any commonality that that youre seeing that that sort of hitting duration right now I realize it fluctuates, but as anything.
So I guess on that front. Thanks.
Yeah, nothing fundamentally changed that means specifically a couple of the larger items were simple co terms. So you have there just co terming two there.
The number of deals they have onto a common date, so it's nothing more fundamental than that.
Great. Thank you all.
Sure.
Your next question comes from the line of javelin dress Tang from Truest Securities. Please go ahead.
Thank you and thanks for taking my questions.
Just sort of macro issues you guys have talked about I was just curious how that price increase conversations trending profile, especially in the environment.
The macro has gotten a little challenging to making sure.
Still feel good about your fourth burst and price increase expectations for next year.
I can take that one overall.
We're not doing price increases we're doing we keep up with the CPI and we're doing it in a very.
Customer friendly way.
That being up by 4% and.
And we're doing that in arrears by giving the customers at least eight months notice depending on when their order forms so no.
It's going well.
I definitely don't view it as a.
Our price increases very predictable from Veeva. So.
The macro is not really affecting that.
Okay, and then my follow up.
Is that around the comment you had in your prepared remarks about data market in life science, moving somewhat slower than the softer market and you called out anti competitive behavior from one of your peers can you elaborate more on that is that something you have observed more recently after you push in this market how does those market dynamics impact your approach.
And generally just pushing this market.
I called out the behavior of our competitor activity I know that's not a dynamic.
The recent dynamic I've been aware of that for more than 10 years.
Course, IQ, it's been in court multiple times for this.
So it's not a.
It's just not a new dynamic I just felt in the prepared remarks to call. It out in data and it can be a bit slower moving because of the conservative in that area.
Conservatism in that area.
That's understandable and then the anticompetitive behavior by <unk> also creates.
<unk> barriers there because let's say the customer is using <unk> data for one data product.
We are selling one data product.
<unk>.
Our services are necessary to to Mick.
Mix those two data products together to provide a solution for the customers well I cubie is not going to allow us to do that they're not going to grant let's call. A third party agreement. So that's what slows things down but.
We're making great progress and it's easier for a small company when they start up so I think next year, you'll see some smaller companies commercializing. The first time that just decided look coming to be IQ via free for my whole life and I'm going to start out that way.
Need to deal with that old stuff anymore, I think that's going to happen but.
That's a long way from pay most of the top 20, using veeva for most of their data products for most of their brand.
You know that's a 15 year journey.
Great. Thanks, a lot.
Thank you.
Your next question comes from the line of Craig.
<unk> from Morgan Stanley. Please go ahead.
Thank you I just following up on the buyer and GSK commentary.
There anything in particular about those customer relationships that made it logical for them to be early adopters on bulk.
CRM and how are you thinking about the cadence for additional customers from an announcement perspective like next year.
Yeah good.
Good question and every every customers and is unique they are all in their own different stages.
Whether that's things related to their business or their pipeline.
When they may have product launches.
GSK and buyers we've had good deep long standing partnerships with both companies for very long time.
And.
They are thinking they both had this idea of of leading thinking we want to put the decision making process behind us and we want to start focus on executing.
They were confident they did their due diligence.
Very quickly became very confident in their answer in their approach. So they wanted to put a clear stake in the ground and make that decision and communicated and now shift into execution mode.
I would say just strong partnership we've delivered very well and consistently for them for a very very long time, They trust veeva.
So they're ready to ready to move forward.
In terms of other customers in the rest of the market.
We're certainly in conversations with the rest of the top 20, Oh, So large enterprise companies of course are small and medium sized customers. Many of those conversations have started it's not a mathematical thing you won't see.
We know we have the next roughly five or six years, but its not mathematical it's dependent upon many different factors and variables. So I would think of it as we're in that early customer stage right now and then over time, you'll start to see it ramp it.
Some of these you may not see announcements I think the way to think about it is we'll provide updates when there is kind of a material update to give you may not seen announcements from if for every customer bucket.
So it will.
When there is something material will kind of what the sluggish right now.
That's helpful. Thanks, Paul and then Peter you made a comment regarding the IRI in terms of smaller biotech innovation and that certainly and focus here I'm curious just your largest pharma companies any feedback you're hearing from them, whether it's maybe tradeoffs, there, making as they kind of manage around this.
Any feedback there.
Yes. They are looking at that in terms of their product planning where would they invest pace should they invest in that molecule.
Should they delay running a trial or accelerate running a trial. So certainly it is if it affects their.
They are planning.
But pharma is good at that they have to adjust to these factors. These government factors around the globe and so I think there.
They are adjusting and it may become the new normal in any.
In a year or two.
So no no dramatic change.
Some adjustments.
Okay. Thank you.
Your next question comes from it comes from the line of Charles <unk> from TD Cowen. Please go ahead.
Hi, This is Lucas on for Charles I wanted to ask about the development cloud and the subscription growth framework you guys have going forward.
I look back at the Investor Day slides, where you guys break out customers and products per customer. It shows that you guys are seeing fewer total products sold in the development cloud through fiscal first half.
Same time, you are guiding to 22% to 23% growth in <unk> after accounting for the impact of TFC.
Which is a step down from <unk> <unk>.
As I've noted that youre not seeing any impact from macro on subsequent yet but this is a notable step down in growth is this an indication that the segment is starting to mature a bit and that we should think about this category growing at a more mature rate going forward and then I understand that we'll get guidance at the next print but is this 20.
2% growth rate ex TFC, a good jumping off point for R&D subs growth.
25.
Yes so.
To your point, we reiterated the fiscal year 'twenty five guide at $2 75 billion. So clearly that factors in subscription and services and the mix underneath that.
What we did see was timing.
When you talk about in the year. So there's some timing that impacted fiscal year 'twenty four it will have a less of an impact on fiscal year 'twenty five but importantly, we have a long runway for growth in front of US we're very early days.
Across the portfolio, specifically in R&D and to your point, we'll get into the details in about 90 days.
Okay. Thanks.
Thank you.
Your next question comes from the line of Brent embraced Flynn from Piper Sandler. Please go ahead.
Hi, guys. This is Hannah <unk> on for Brian. Thanks for taking my questions encourage to hear about your early traction with vault and CRM for those six non vault Veeva CRM customers you landed in the quarter due most of them plan to migrate to vault CRM before that 2030 deadline or is that even part of the discussion when you are signing with them.
Okay.
Yes. So we did have we had a good strong quarter.
CRM overall, we had nine wins and Youre right. Some of them are on Veeva CRM and each of those is a discussion with the customer and what's right for them based on their timing and yes of course, that's the that's the strategy as to who will start on Veeva CRM and then at some point before 2030, though they'll move over to Ralph CRM.
For some of these customers that are now doing veeva CRM.
We can.
That transition path becomes pretty clear and very very clean survey they have full awareness and knowledge and that's part of the strategy.
Great Super helpful. And then at your European commercial summit other than vault CRM, what commercial developments, where customers are most excited to hear about.
Yeah, Gosh, you're asking me to pick one we had a we had a.
A very lively Europe comment.
And part of that is related to.
We now have our commercial products are software products that are moving and all part of our platform. So that unlocks a lot of potential for us. So we were able to announced quite a bit.
One is for Peter alluded to the service Center demo will remember, we announced that five or six months ago with our U S pharma and now we demo it live so really strong execution.
<unk> really well the announcements around marketing and patients outpatient CRM. We're certainly appreciate it.
And then.
In the data space.
We had a new data announcement around pulse data I don't know Peter talked a lot about that during our investor day, but more broadly what we're doing in data. The innovation, we're bringing we are bringing in data by creating a common data architecture. So you asked for one thing I gave you four or five but it was it was really just kind of an action packed.
With lots of announcements and we created a lot of momentum in multiple different areas.
I think you might hear about there was a lot of.
Paul There was a lot of excitement around modular content in the commercial content areas as well that that track was very largely because we've done things over the last year and modular product content and now it's getting adopted in the field. So that's great excitement over that one too.
For sure.
And Matt and just to.
Go into that a little bit deeper.
We're executing really well on the commercial content side and module content.
But as we think about vault allows us to do what's bringing that content closer to the engagement channel. It's a platform that uniquely supports both of those content.
And the engagement, whether it's the sales channel our field medical or even marketing in the future. So it's highly unique in that that we're in a unique position to be able to solve that that content distribution from the time you created in a very modular efficient way all the way to the time it gets out to the end customer.
Whether it's a marketing channel or our sales channel.
Yeah that was also another exciting announcements.
Super helpful commentary. Thank you.
Your next question comes from the line of Brad Thomas from Bank of America. Please go ahead.
Oh, great. Thank you so much I wanted to ask about the comments on this.
Some of the deals slipping that affected the quarterly billings.
And into next year.
Any more color there I mean, we typically hear about deals slipping and then and then they close in the subsequent quarter or so.
What are the puts and takes that are impacting that and what gives you that confidence that these will close next year. Thank you.
I'll take that one that you feel is different but I would say by and large.
Timing that gets pushed out by.
Some random amount to the ball and some conservatism and extra extra scrutiny.
So.
That's what it is what gives us confidence is the competitive environment is stronger than ever right.
So that's what gives us real confidence both in each of our product areas and then customers seeing that while we can bring complete solution across R&D and commercial software and data.
Also the customers being slightly a bit more conservative they're not customers are spending less on speculative projects.
So they tend to go more towards Steven and core capabilities. So that's what gives me even more confidence about our strong market position.
And then since our products aren't optional.
Over time I have a lot of a lot of.
Confidence that our market share we're in a better market position than we were 12 months ago.
Wonderful. Thank you and then if you could comment please Peter on just the clinical deal pipeline and how how that's been impacted.
It would seem less impacted by by the macro because its trial related.
But these are also big transformational projects, if it's a new customer for example, so any.
Any commentary observations on how the macro is impacted that clinical business, which is such a critical growth driver. Thank you.
Yeah, we have a small amount of our businesses and the clinical and the very small.
Customers you know maybe that have under 500 employees under 300 employees, so that certainly impacted because sometimes people can't get the funding to do the trial or they might go out of business. So.
That's impacted specifically other than that the general conservatism it doesn't impact.
Impact clinical it any more than it would be a regulatory or safety or quality. These are.
Is it a large infrastructure projects.
And and Theyre, just having a bit more more scrutiny than they used to.
Understood. Thank you Peter.
Okay.
Your next question comes from the line of Richard Poland from RBC Capital markets. Please go ahead.
Yes.
Yeah, Hey, this is actually Richie deloria from RBC not sure why it well my colleagues name, but thank you. So much for taking my question I actually wanted to ask two questions around generative AI first I would I would love to maybe drill a little bit into kind of a theme that we've been hearing more as we've been doing that.
Rising industry.
Is that just the AI is working behind clinical trials.
It is.
Leading to maybe more of a tailwind towards personalized and precision medicine, which feels like not only should that benefit you see dms platform, but even on the data side. What you have with Tom correct me, if I'm wrong. It seems like it's maybe a little bit more tailored to that so maybe if you could help us understand some of the trends that youre seeing out there and how that can play out.
Then I've got a quick follow up.
In terms of the generative AI.
Well honestly I haven't seen a big impact in clinical theres, good experimentation and projects around helping to write or evaluate protocols for example, but I'm not.
Using things like generative AI too.
Do statistical analysis or predict where the patients are I think there.
The more appropriate tool, which people are using and continue to use more and more of us.
Data science really having the right data running the right algorithms screen.
Systematic about it.
So yes, just haven't seen that impact of generative AI you see it more in other areas that relate to <unk>.
Content creation and.
And asking asking of questions riding safety narrative things like that.
Got it that's really helpful and then may.
Just sticking on the theme of clinical and Gen II coming off the <unk>.
Commercial summit sure you heard a lot of use cases from customers that they want to explore around journey on the commercial side I think a lot of those very straightforward maybe on the coal side right. I mean, we've talked a lot about <unk>, but I imagine there is a lot of data you Peter it's Brian I'll round content, including regulatory submissions.
The FDA.
I imagine, there's probably use cases around the type of language that people can use to expedite their approvals and so on and so forth. Maybe you could talk a little bit about what sort of use cases, you're hearing from customers that they want you to be part of.
When it comes to the clinical side of the equation that'd be really helpful. Thank you.
Yeah. So.
So.
Some are just very straightforward, what's called critical master data to are the investigators who are in the sites.
Around the world and what is there.
Patient characteristics like that's hugely important.
Poor or.
Our site selection, but also also core recording your your internal operations how efficient are you.
And then so that's what we've called open later clinical.
Site base is the deep profiles around all the sites and investigators all of their specialties.
All they're all their activity. So that's again for a more detailed site selection than clinical pulse, that's something that we've announced which will be producing next year and that's things like okay. I'm, a pharmaceutical company and I pick these two milestones to measure what's the what's the time between.
My my last patient visit and my lock up my clinical database and I'm, a pharmaceutical company. What's my time, there, Okay and now what's the industry's average time there for.
So that I can start to see him I ahead behind there with my opportunity for improvement in that.
And that's just one measurement. So I think it's those three areas that customers are excited about from Veeva clinical master data the deep data specifically around site selection critically important and then the clinical pulse too.
Optimize their internal business processes and benchmark against the industry.
Wonderful. Thank you so much.
Thank you.
And we have no further questions in our queue. At this time I will now turn the call over to Peter Gassner, Chief Executive Officer for closing remarks.
I'd like to close by thanking our customers for their trust and partnership and our employees for their continued commitment to our values of do the right thing customer success employee success and speed.
Thank you.
This concludes today's conference call. Thank you for your participation and you may now disconnect.
Please wait the conference will begin shortly.
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