Q1 2026 Veeva Systems Inc Earnings Call
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[music].
Ladies and gentlemen, thank you for standing by.
Abby: My name is Abby and I will be your conference operator today.
Abby: At this time I would like to welcome everyone to the Veeva systems fiscal 2026 first quarter results conference call.
Abby: All lines have been placed on mute to prevent any background noise.
Abby: 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.
Abby: I would like to withdraw your question Press Star one a second time.
Speaker Change: Thank you and I would now like to turn the conference over to Gunnar Hansen Senior Director Investor Relations you may begin.
Gunnar Hansen: Good afternoon, and welcome to <unk> fiscal 2026 first quarter earnings conference call for the quarter ended April 32025.
Gunnar Hansen: A reminder, we've posted prepared remarks on <unk> Investor Relations website, just after <unk> pm Pacific today.
Gunnar Hansen: Hope you have had a chance to read them before the call.
Gunnar Hansen: Today's call will be used primarily for Q&A.
Speaker Change: With me today for Q&A are Peter Gassner, our Chief Executive Officer, Paul Shalwar, EVP strategy, and Brian Van Wagner, Our Chief Financial Officer.
Speaker Change: 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 Change: 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.
Gunnar Hansen: Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-K.
Gunnar Hansen: Forward looking statements made during the call are being made as of today May 28, 2025 based on the facts available to us today.
Gunnar Hansen: This call is replayed reviewed after today the information presented during the call may not contain current or accurate information.
Gunnar Hansen: David disclaims any obligation to update or revise any forward looking statements.
Gunnar Hansen: We may discuss our guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.
Gunnar Hansen: On the call. We May also discuss certain non-GAAP metrics that we believe aid in understanding of our financial results.
Peter Gassner: A reconciliation to comparable GAAP metrics can be found in today's earnings release and in the supplemental investor presentation, both of which are available on our website with that thank you for joining us and I'll turn the call over to Peter.
Peter: Thank you Gunnar and welcome everyone to the call. It was a strong start to the year with results above our guidance total revenue in the quarter was 759 million and non-GAAP operating margin of 46%. Thanks to the team and our customers. We have now achieved our calendar 2025 revenue run rate goal.
Speaker Change: A $3 billion.
Speaker Change: Although the macro environment is more uncertain today compared to 90 days ago, we have not seen a material change to our financial results or our pipeline at this time.
Speaker Change: Setting our sights on our 2030 goals last year is really aligned and energized.
Speaker Change: I consider this our best first quarter ever and how we're executing across the company.
Speaker Change: AI is a major initiative initiative and off to a good start.
Speaker Change: Especially excited about the positive impact it can have on the life Sciences industry.
Speaker Change: We'll now open up the call to your questions.
Speaker Change: Thank you.
Speaker Change: If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
Speaker Change: If you are called upon to ask your question and our listening via speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: To be able to take as many questions as possible. We ask that you. Please limit yourself to one question and one follow up.
Speaker Change: Again, it is star one if you would like to join the queue.
Speaker Change: And our first question comes from the line of Joe <unk> with Baird. Your line is open.
Speaker Change: Okay.
Speaker Change: Thanks for taking my questions I wanted to start with your perspective on the 200 customers moving to.
Speaker Change: Voluntary considering both CRM for next year.
Speaker Change: I imagine many of these migrations have the reasons customers cited behind migration decisions changed at all and the reason I ask is it seems like Vivat does play and has really delivered on our product roadmap. One shared customers can now see things like service Center and campaign manager.
Speaker Change: And you also now have I would say more fidelity behind the AI strategy are they starting to factor in and so why now why the decisions and maybe on the flip side when customers arent moving with you what's coming up in those locations.
Paul Shalwar: Hey, Joe This is Paul Thanks for getting us kicked off here, so just to be clear on that.
Speaker Change: I remember one year ago, we were at a handful of customers live.
Speaker Change: We're at about or over 80 customers life and I think the number you are referencing is about one year from now.
Speaker Change: We're on track to be about 200 customers live on vault CRM. So while CRM is going really well it's working.
Speaker Change: Now the why.
Speaker Change: Why is that it's it's better than Veeva CRM customers like Veeva CRM, but its better and what makes up that 200 number are really two things, it's new customers and it's migrations. So in the quarter as an example, we added 28 <unk>.
Speaker Change: While CRM customers to that number and where we had it's all Sharon.
Speaker Change: Sorry, 28 also your customers total and about half of those were migrations and the other half were net new customers to leave us. So that's how to think about what will make up about 200, new customers and migrations.
Speaker Change: The reasons are everything that we've talked about it's better our AI strategy will have agents in the product by the end of the year.
Speaker Change: <unk>.
Speaker Change: Premium sales marketing and medical together, we're innovating in a lot of different ways.
Speaker Change: So new companies want to get started there and other customers want some migrate.
Speaker Change: In terms of why customers may not make a decision for veeva and we've seen some of this at some companies want more of a custom type product.
Speaker Change: So I don't expect that to be the path, we expect to win and retain the vast majority.
Speaker Change: Hi.
Speaker Change: Okay. That's great. Thank you Paul.
Speaker Change: I guess on the go forward forecast if an interesting contrast, when you guys are more dynamic macro but outright strength for veeva. When you maybe hone in on some of them are discretionary aspects of your revenue model and I'm thinking about like circle says our navy prospects audience building.
Speaker Change: Do you expect to see those we can at this point there are may be looming signs of pressure for the second half and is the fact that maybe that pressure isn't being seen factoring into how you think about the rest of the year.
Speaker Change: Okay.
Speaker Change: That's a pretty nuanced question is Peter I'll take that one so as we mentioned in the prepared remarks remarks macro environment.
Speaker Change: Certain and there are some uncertainty largely caused by the dynamics in the.
Speaker Change: Asian.
Speaker Change: Now.
Speaker Change: We haven't seen that in our results and we haven't seen that.
Speaker Change: Pipeline is not to say that we would or we wouldn't going forward, but we haven't seen it so far.
Speaker Change: Generally what we could see is funding issues could come.
Speaker Change: There is uncertainties that could come in the small market the smaller side of the biopharma so that could.
Speaker Change: No delay projects and things like that it could cause some conservatism in large pharma.
Speaker Change: But certain things like Cross X.
Speaker Change: That may not be affected by that because cross X has a sort of a shorter business cycle and it's really humming along and so a way to get quick ROI. So I actually don't think it would expect.
Speaker Change: Okay across six.
Speaker Change: That much.
Speaker Change: But we'll just have to wait and see how things play out.
Speaker Change: Thank you.
Ken Wong: And our next question comes from the line of Ken Wong with Oppenheimer. Your line is open.
Ken Wong: Fantastic Peter I wanted to perhaps address the comment you called out in the prepared remarks in terms of.
Ken Wong: The horizontal market seems like you guys have made at least some progress there and youre moving forward on horizontal CRM could you provide us just a little more color in terms of how youre thinking about the approach there the potential differentiation and to the extent there is any kind of timeline that would be much appreciated.
Ken Wong: Yes, we're pretty excited about that new market, so horizontal business applications, which we announced last year now no. What we said in the prepared remarks that we're focusing in for our first area in the horizontal CRM now that when we look at that there's many areas.
Ken Wong: <unk> product area.
Ken Wong: That's something we have to determine inside here on the exact customer segments. That's something we have to determine as well. So we'll go through those motions and figure that out.
Ken Wong: And I'm excited about getting customers. So I hope to have first customers by the end of the year I hope to have that and then you start making the customer successful and that's really how we have grown our business.
Ken Wong: Outside of life Sciences, this new market.
Ken Wong: Different team, it's not going to be confused with life Sciences, It's a different operating model, but the one thing that is common is we can lever our values of customer success and employee success and speed and focus just on customer success and product excellence.
Ken Wong: I'm pretty excited about it actually what we're going to do out there, it's a whole new veeva out there.
Speaker Change: I appreciate the color, we're looking forward to it as well.
Ken Wong: Paul I wanted to maybe dive into the commercial strength meaningful acceleration there I guess fairly surprising considering most of us view that as maybe a more mature business where are you seeing this outsized growth you called out process. So there are other areas of the business, whether it's cross selling something or.
Ken Wong: New product Thats really driving that upside.
Speaker Change: Yes, so youre right I mean, we're executing well across the entire commercial area, but I would I would specifically call out Cross X.
Speaker Change: We invested heavily in the product over the last couple of years and that's paying off in both from a marketing and optimization space also in audiences I remember that can be a little lumpy. So there can be ups and downs quarter by quarter, but over the long term that will be a really nice growth business for us.
Speaker Change: And so across X did well and that we're executing well in all the other areas CRM is relatively stable.
Speaker Change: But which is nice momentum as we look across data cloud.
Speaker Change: And including the link.
Speaker Change: I think early days in those areas, but we're executing well.
Speaker Change: Thanks, Paul.
Speaker Change: Okay.
Speaker Change: And our next question comes from the line of Brent <unk> with Piper Sandler Your line is open.
Brent: Thank you good afternoon, maybe for Bryan sticking with commercial strength here. This is the highest growth rate we've seen in kind of three years.
Speaker Change: And as we Doubleclick you flag Cross X.
Speaker Change: Other drivers you would flag I know data clouds early but is there a contribution there any color just given the magnitude of of acceleration and highest growth in three years any other color would be appreciated. Thanks.
Brent: Hey, Brent.
Speaker Change: Happy with the execution across the business in Q1, and the revenue growth rate that we saw.
Speaker Change: It really reflects I think broad based execution, we saw a strong growth out of our R&D business as well.
Speaker Change: With guidance for the year now at 19% so that remains a really strong growth engine for the business and then the outperformance in the quarter as we called out in some of the prepared remarks, you mentioned was really driven by by cross X, which outperformed our expectations and within cross six predominantly driven by the usage based area of that business, so that can be a little bit lumpy.
Speaker Change: From quarter to quarter and Thats reflected in our guide for the full year, but we're seeing really strong growth out of that business over the long term, it's a business that's growing at more than 30% year over year and so we think it can continue to contribute meaningfully to our growth over the long term.
Speaker Change: Got it over 30% growth Super helpful color, There and then Peter just to follow up on horizontal CRM again, it's your first area. It sounds like you're very excited.
Speaker Change: Why the excitement and I ask why because you have.
Speaker Change: Salesforce, that's kind of a dominant player in the large enterprise space and then you have hub spot that's kind of emerged on the scene here in N. S. M. B so what's unique.
Speaker Change: About horizontal CRM that gets you excited about what veeva is thinking about here. Thanks.
Speaker Change: Okay.
Speaker Change: It's unique in that there's so many things we can do.
Speaker Change: Now I would say Veeva is more expert at large market as well as where our large enterprises and then we would be Maryland, Quickbooks type rehab slot area. So, yes, I think youll see us.
Speaker Change: To get there, but there is many many entry points. We can go after and we just think it's a little different innovation. When you look at the technology that we can bring to it and our business model, our public benefit Corporation orientation, where it will be a very differentiated offering.
Speaker Change: So.
Speaker Change: We're excited about it and you know this excitement.
Speaker Change: Getting close to getting our first customers in our first product.
Speaker Change: And knowing that we have a great team on it.
Speaker Change: And also I think some thinking what you are hearing the excitement of some of the fundamental technology breakthroughs, because youre not going to go into on this call but.
Speaker Change: I think people got used to that Theres nothing new that you can do but actually there is something that you can do so we're pretty excited about it.
Speaker Change: Call me intrigued.
Speaker Change: Interesting to watch thank you so much.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And our next question comes from the line of socket Calia with Barclays. Your line is open.
Speaker Change: Okay, Great Hey, guys. Thanks for thanks for taking my questions here and nice start to the year.
Speaker Change: Peter maybe maybe for you just to dig into the cross X business, because it's been mentioned a few times.
Speaker Change: And it seems like it was one of the main drivers to some of the billing strength.
Speaker Change: Outside of FX can we just dig into that I mean, it seems like youre gaining market share there have been questions just around around macro uncertainties, whether customers would be willing to invest as much in tools like that but this seems to be bucking. The trend can you go one level deeper into what you think is really driving that strengthened cross X.
Speaker Change: Yeah.
Speaker Change: At the highest level I would say, it's we're growing the product.
Speaker Change: And we'll start with clinical back in the day, we had one application and I knew we had to and our clinical operations team <unk> team that.
Speaker Change: Now we have about five major applications. The same thing with caustic. So our project started historically with digital consumer.
Speaker Change: Measurement and optimization now, we're starting to get very strong in HCP healthcare provider measurement.
Speaker Change: Hospitalization and then audiences across both both segments.
Speaker Change: <unk>.
Speaker Change: Our offering is getting more broad and getting more valuable so when we when we sell a pretty comprehensive cross deal that value is maybe double the size of what it was three years ago, because the value we can provide.
Speaker Change: Then.
Speaker Change: We also are seeing companies really and it's a trend that continued lean into leveraging their digital spend.
Speaker Change: Yes.
Speaker Change: We could spend.
Speaker Change: Let's say $500 million in in digital advertising.
Speaker Change: Advertising, if they can double the value of that that's very fast ROI.
Speaker Change: 12 months implementation.
Speaker Change: A quick one quick question. So you've seen that also you're seeing us take a more strategic approach.
Speaker Change: Meaning the integration with our CRM products and optimizing more for long term agreements rather than shorter term agreements.
Speaker Change: And just getting higher in the account.
Speaker Change: It's a combination of factors.
Speaker Change: I will honestly say, it's without a great team on graphics to great leadership.
Speaker Change: All the way down to the analyst level and the leadership and they're just executing they're humming along so there were kind of winning the race.
Speaker Change: Got it that was a super helpful answer Brian maybe for my follow up for you. It's great to see the higher Billings guide for the year I don't think a lot of folks were expecting that even excluding the FX tailwind can you just maybe dig into some of the drivers there maybe we hit on some of it here with cross X, but also some of the other drivers there maybe like billings duration or any other.
Speaker Change: Things that you want to flag as we thought about as we thought about the slightly higher guide for billings for the year.
Speaker Change: Yeah, Hey, sockets. So yeah, two major factors as you mentioned.
Speaker Change: One is the FX guidance, that's flowing through to billings, but then the other is largely the revenue outperformance that we saw in Q1 from the subscription side coming through to billings. There is always a little bit of timing and duration things at the margin and there's some of that in there, but the main two factors our FX on the revenue beat.
Speaker Change: Super helpful. Thanks, guys.
Rishi: And our next question comes from the line of Rishi <unk> with RBC. Your line is open.
Rishi: Wonderful. Thanks, so much for taking my questions, maybe two strategically focused ones number one.
Rishi: Yes.
Rishi: Wanted to think about.
Speaker Change: CRM business, you've talked about getting into marketing and service and you came out some initial applications. There maybe can you talk about what youre seeing from early customer feedback and adoption of these and at what point, whether it's next year three years five years, how can we actually become share gainers in the space and then I've got a quick.
Speaker Change: Follow up.
Rishi: Yeah, Hey, Rishi.
Rishi: We're early in both of those areas.
Speaker Change: But to your point since we made the move to Volte CRM, we've been able to innovate in totally different ways, new ways and that includes bringing sales and marketing and service altogether in a single customer database that that hasn't been done in life Sciences.
Rishi: It's resonating really good for customers it will help our customers become more customer centric.
Rishi: So this is a significant value proposition, but we're very early days.
Rishi: Citing news is we have some early customers and both of those areas. We're just getting started remember the requirement has got their own volte CRM.
Rishi: For someone to get started with let's say campaign manager Our service center. The first step is.
Rishi: Moving migrating adult CRM or getting started on golf Sharon So it's a smaller pool to plan at least today and we're going to focus.
Rishi: Which means will largely focus on some smaller and mid sized customers, but then over time I expect that we'll we'll make even more progress in the <unk>.
Rishi: Mid size and even in the large company so.
Rishi: There's a long journey, but we're innovating in a really different way, it's something to be excited about.
Speaker Change: Alright wonderful that's really helpful. And then Peter on the AI front look I. Appreciate that you are taking a more gradual and slow approach to AI versus kind of over promising and under delivering which I think is always interfere with any new technological wave maybe can you walk us through.
Speaker Change: One how youre kind of thinking on AI in life Sciences, and a willingness to adopt it has evolved and number two if we think about kind of what this can really unlocks the customers over time, where do you kind of see it shaking out other than the typical efficiency gains because I'm sure that there is a major unlock that you can see over time using AI.
Speaker Change: Yes, I do I'm very bullish about what we can.
Speaker Change: Data can bring.
Speaker Change: With AI cause life Sciences industry I think.
Speaker Change: If you look over the next 345 years out to 2030, I think can help increase life sciences efficiency by 15% or so that's a huge number when you look at that.
Speaker Change: I really think it will be.
Speaker Change: Change.
Speaker Change: I am so bullish on it because.
Speaker Change: <unk> has the core applications and we are building the AI very deeply embedded in the core applications. So when we build AI, we're not building a generic AI. We are building a medical legal regulatory approval agent.
Speaker Change: CRM agent to those pre call planning.
Speaker Change: The AI agent that can transcribe pre tax into a safety case, so deep AI applications.
Speaker Change: And you need the deep core applications and the AI working together and that's where that's where the magic will happen. It's just very very very clear to me.
Speaker Change: Yeah.
Speaker Change: That's what I'm excited about.
Speaker Change: I think we.
Speaker Change: The core technology has come down a little bit in terms of large language models whats going on there and then it's very clear that this AI as the new computing paradigm.
Speaker Change: It's it's something that can automate certain things that humans can do which could basic software traditional software can do that it doesn't work like this as non deterministic computing. They can automate some things that the human can do but it doesn't obviate the need for our core application.
Speaker Change: Let the core.
Speaker Change: It's settled down of the large language models get settled down we developed a partner program and developed our direct data API now we got a.
Speaker Change: Specific and separate team working on on beta AI.
Speaker Change: I couldnt be more pleased with our positioning.
Speaker Change: Right now what they are.
Speaker Change: Very helpful. Thank you so much.
Speaker Change: And our next question comes from the line of Brian Peterson with Raymond James Your line is open.
Brian Peterson: Thanks, gentlemen, and congrats on a strong quarter, Paul I know you talked with a lot of customers and how they're thinking about their go to market motion I'm curious on the relative prioritization of it spend if we think about it in the lens of sales versus marketing versus customer service or any of those areas, you've seen increased or decreased prioritization and.
Speaker Change: Jen AI world any thoughts on that.
Speaker Change: Yeah, Hey, Brian Thanks for the question.
Speaker Change: So, we're whereas AI are likely to be in across sales marketing or service.
Speaker Change: Yes, two questions overall way to think about.
Speaker Change: The farm industry is.
Speaker Change: Human relationships sales organization spend on the sales force is very significant and very meaningful and if you can provide productivity gains and effectiveness gains for the field team you have a very significant impact. So I think there is a we're seeing a lot of focus in the sales side, which is why.
Speaker Change: One of our first agents will be in the <unk> in the core CRM space CRM Bot, we think we can make.
Speaker Change: Customers significantly more productive from a field perspective, so it's not to say that we're not seeing investment in other areas certainly customer service case and take as an example, there is a lot of examples on the marketing side, but.
Speaker Change: But I would prioritize sales higher given the size the importance of their relationships and their potential impacts were at the half.
Speaker Change: Got it I appreciate the color in Bryan I know in the prepared remarks, Peter mentioned, some some and he's from some of the customers I'm curious as you think about the outlook for the remainder of the year was there any incremental caution that you factored into the guidance. Thanks guys.
Speaker Change: Thanks, Brian so without a doubt I would say theres more uncertainty today than 90 days ago, and so if that persists, it's not going to have a positive impact on the life sciences industry around patients.
Speaker Change: That said so much of our business is subscription based its in mission critical areas in the industry that we serve is more long term oriented so in the short term or a bit more insulated from some of those pressures and as we said in the prepared remarks, we're not really seeing any material impact to our financials our pipeline yet we've got deals progressing as expected <unk>.
Speaker Change: Tracts are renewing projects are proceeding on or ahead of schedule.
Speaker Change: So given all of that our guidance right now assumes that things continue roughly as they are now that means that there is more uncertainty in the world and the need that comes with that but that customers continue to navigate it effectively.
Speaker Change: Thanks, Brian.
Speaker Change: Okay.
Speaker Change: And our next question comes from Dan Bernstein with Wells Fargo Securities. Your line is open.
Dan Bernstein: Hi, Thanks for taking my questions first maybe going back to prospects we heard recently.
Speaker Change: There's been some pull forward in commercial activity by Biopharma and to the first half of the year I'm just curious if youre seeing any signs of the southern Cross X. Maybe you can square that with how <unk> has performed.
Speaker Change: Year to date versus same time last year.
Speaker Change: Yeah I'll pick that one this is Peter I wouldn't say any particular pull forward we're seeing.
Speaker Change: I think we are seeing in the case of cross X.
Speaker Change: Customers, just wanting to build up there.
Speaker Change: As your marketing capabilities and part of that as being more more effective on.
Speaker Change: Theyre, putting their campaigns and their audiences. So I wouldn't say any particular pull forward.
Speaker Change: Okay, and then a follow up on the <unk> products I think it's been a little bit more than a year. Since you launched the prescriber and National Congress products was just hoping to get an update on the adoption of momentum trends under the segment. Thanks.
Speaker Change: Yes, Compass is doing well, we added about 10 brands this quarter.
Speaker Change: <unk> in the patient area and that that continues to grow.
Speaker Change: Opposite campuses marathon industry is used to doing things in a certain way with data and it's hard business to get into but we're making good progress there in terms of cost.
Speaker Change: Prescriber National I would say, we're still definitely in the early adopter area. So we've got a few early adopters pipeline is getting a bit bigger.
Speaker Change: We're focused on adding to our data network and also focusing on customer success, so and prescriber and national It's just not a.
Speaker Change: The mature business.
Speaker Change: The business to scale yet.
Speaker Change: But we're encouraged by what we see from early adopters.
Speaker Change: Alright, thanks, so much.
Speaker Change: Okay.
Speaker Change: And our next question comes from the line of Tyler Radke with Citi. Your line is open.
Speaker Change: Okay. Thank you for taking the questions Peter wanted to start with you on the macro environment.
Speaker Change: You talked about some of the tariff uncertainty not being great for business, which I think we can we can all appreciate but.
Speaker Change: One of the things that we have heard some signs of potential reassuring in terms of the manufacturing within the pharma industry to what extent do you. How do you view this opportunity as this the potential tailwind I know, it's potentially a ways away, but would just love to hear the conversations youre, having with customers.
Speaker Change: How veeva could potentially benefit from that.
Speaker Change: Yeah.
Speaker Change: Specifically about the tariffs and the potential reassuring.
Speaker Change: I wouldn't say, that's a headwind or a tailwind will be that actually.
Speaker Change: There were really looking at enterprise type of capabilities and our large customers and then for small customers for small biotech they wouldn't generally have multiple manufacturing sites and they will use contract manufacturers. So.
Speaker Change: I think it's not a not a headwind there could be a tailwind if if they have to do anything alright, there could be a headwind if they have to do things that take a higher priority, let's say they have some long term capabilities projects in the quality area.
Speaker Change: To get started on but theres some emergency re shoring that they have to do that could take.
Speaker Change: The crocus and delaying projects now having said that we've seen no evidence of that so far.
Speaker Change: Okay great.
Speaker Change: A follow up on the.
Speaker Change: Yes on the on the updated.
Speaker Change: For the full year.
Speaker Change: Earlier questions was sort of asked but.
Speaker Change: I guess are you if we think about the changed versus 90 days ago.
Speaker Change: On the revenue and Billings guide are you.
Speaker Change: Increasing discount rates or any type of deterioration in close rate assumptions are you assuming the <unk>.
Speaker Change: Consistent macro environment versus 90 days ago, and I think investors are trying to understand is this was a very solid quarter, but with the raise be even greater had you not seen kind of the macro and tariff uncertainty play out in the quarter.
Speaker Change: Yes, I think we really have not seen any impacts from the macro on the velocity of business on close rates or those kinds of things and so what youre seeing in Q1 is again that outperformance largely of the cross segment and then the timing of services revenue. So that that timing, we expect to kind of normalize back out as we go through Q2 to Q4.
Speaker Change: On services and <unk>.
Speaker Change: So the beat on Q1 cross excited really pulls through to the balance of the year and you see that reflected in the <unk>.
Speaker Change: The billings guide going up as well.
Speaker Change: So outside of those factors I would say that the business is largely as we expected it to be 90 days ago, We're seeing really good execution in all the areas of the business and feeling really good about the trajectory going forward for the year.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: And our next question comes from the line of Craig Hatkoff with Morgan Stanley. Your line is open.
Craig Hatkoff: Great. Thank you.
Speaker Change: Just following up on the macro.
Speaker Change: Do you think would prove to be most insulated like if things do get more difficult into the back half are there parts of the business you would expect to be kind of most insulated versus some areas that you would expect to maybe see some impacted if things were to deteriorate.
Speaker Change: Okay.
Speaker Change: Ill take that one hard to estimate too much because there's multiple ways that things could deteriorate it could be interest rate that could be.
Speaker Change: It could be drug pricing specific to one country or another it could be geopolitical conflict. So hard to really speculate there. The most durable part of the business as our long term subscription contracts because they just don't really get affected by things then.
Speaker Change: <unk> consulting engagements services engagements those are fairly quickly.
Speaker Change: Impacted.
Speaker Change: And if things get very tough, which we saw a number of years ago. It can impact are really small emerging biotech because they can't get funding until projects would stop and then sometimes they may go out of business. If the funding environment is there enough. So the bulk of our businesses in these long term subscription projects and those just aren't susceptible.
Speaker Change: Both of those short term swings.
Speaker Change: That's helpful. Thanks, and just as a follow up Peter understanding its Viva AI, just recently kind of rolled out any initial feedback from customers and how you think you know in the coming years, how it might impact your overall business.
Speaker Change: Yeah, Hi that impact the reception from customers is very positive because it just makes sense.
Speaker Change: Not a lot of hype they need the AI working with the core applications. They know who the cares about the industry will be responsible with the data.
Speaker Change: And they can see the tangible use cases, so there's a lot of excitement how it can move our business scored I think.
Speaker Change: It's something that we will we will charge you know unappropriate license before so I think it will be a net positive for Veeva, we don't have that packaging worked out yet.
Speaker Change: We do want to price it so that it can be very reasonable and broadly adopted help the industry move forward and yes, certainly help our revenue all the time, but we don't have any specific projections at this time.
Speaker Change: Understood. Thank you.
Speaker Change: Thanks.
Speaker Change: And our next question comes from the line of Kirk <unk> with Evercore ISI. Your line is open.
Speaker Change: This is bill on for Kirk and Thanks for taking my question. Peter can you highlight some of the key takeaways from you from the commercial summit last week.
Speaker Change: Sure commercial summit.
Peter Gassner: I would say.
Peter Gassner: First thing I would take away it sounds very basic but the customer is feeling as good.
Peter Gassner: Probably had.
Peter Gassner: More than 51 on one conversations that were each of.
Peter Gassner: Five to 10 minutes or so.
Peter Gassner: A pretty representative sample size and <unk>.
Peter Gassner: Non scripted so customers feeling is good that means you're executing well we are hiring good people that have the right customer relationships that are confident that are bringing value and our sales services consulting product management. So that's number one and I think that is not to be underrated because bad that is.
Peter Gassner: That will bring.
Peter Gassner: You over the next 510 years.
Peter Gassner: The next one is a whole different five around these this year around vol. Zero 80 customers live this time versus just a handful last year products mature.
Peter Gassner: Couple of Big top 20 customers Midway in flight, we had one of them zoom in to that couldn't actually be there the person that some things where they couldnt be there at that summit. So they assumed in this is the person the SVP of digital from a top 20 pharma.
Peter Gassner: Confirm yes, we will be live here in a month or so and truly live in all of our.
Peter Gassner: Multiple.
Speaker Change: Close to 20000 people around the world by the end of the year because that was a whole different vibe, there and then b the AI, making it real when I showed the demo of the the AI. One example, what veeva AI can do with CRM, but you can just see the Aha moment.
Speaker Change: Go with the customers because.
Speaker Change: What they want is they want AI to help them with.
Speaker Change: The engagement planning right do all that work and then all of the data entry afterwards do that work. So they can focus on the engagement in their field.
Speaker Change: You'll just see the light bulbs going on and that's what I'm excited about about I want to be known as the company that while they really did AI right, maybe union durable way, that's adding a ton of value where veeva.
Speaker Change: It is bringing in one dollar and customers who are getting $4 of value Wow that was done right. So there was that feeling for the first time.
Speaker Change: It's somewhat relief because we think we've been measuring carefully on AI not jumping in.
Speaker Change: Hyping.
Speaker Change: So then you could see that relief from the customer. Yes. This is the aviva here. It goes right. They have a plan now that are starting to execute and making plans around that so that was the excitement.
Speaker Change: And look that last thing I'll mention is that our data business data cloud is becoming really real and people are starting to understand hey, we have commercial cloud and data cloud.
Speaker Change: They work together and modular, but you can connect them and Thats, what our commercial solutions are so visa not just with CRM company anymore.
Speaker Change: I remember some years ago on our earnings call multiple years ago.
Speaker Change: Iran overtime will be not the major part of our commercial solutions.
Dan Bernstein: Dan could you see that at summit.
Speaker Change: CRM add on products marketing service Center data cloud Cross six business consulting.
Dan Bernstein: <unk>.
Dan Bernstein: Since the start of our commercial court here so that was.
Dan Bernstein: We ask the small question I guess, you've got more of an answer than you were looking for but that you can tell the excitement about commercial something about 2000 people there and so many ideas, which date. It was wonderful I think we should keep doing it Paul do you think we should keep doing our summit.
Speaker Change: Count me in I'll call, it's not something where you think you Ann Okay, we're going to keep going up.
Speaker Change: Okay.
Speaker Change: Great. Thanks, Thanks for that answer.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Joe <unk> with tourists Securities. Your line is open.
Speaker Change: Yes. Thank you thanks for taking my questions and congrats on a strong quarter I wanted to ask about the CRM conversions to Veeva CRM I understand these top 20 pharma companies still have some time before they can decide and you have three top 20 going live in 2026.
Speaker Change: Internal.
Speaker Change: Patients.
Speaker Change: Spectation if you had like maybe 18 to 24 months back are you still priced by the pace at which these top 20.
Speaker Change: Through one of the most common decision, making dry what you come across in terms of these top 20 biopharma companies.
Speaker Change: Yes.
Speaker Change: I would say overall, we're making great progress in top 20, and we're on track with our expectations as I think back a year or two years ago on track, maybe even a little bit ahead of what our expectations were.
Speaker Change: Now you think about what does that timing look like and what is what makes up that decision making process.
Speaker Change: Customers are happy with Veeva CRM, we're not pushing anybody to move so there's not really that urgency now eventually there will be we've talked about.
Speaker Change: The Red zone.
Speaker Change: Which starts to kick in in that 2027 timeframe, particularly if youre a large customer top 20 company you want to make a decision before that 2027 timeframe, which is why we've said most large companies will make decisions either in 2025% in 2026. So it will have plenty of time to migrate and move.
Speaker Change: So.
Speaker Change: Customers are happy they're in.
Speaker Change: They're going to make that decision when they are ready, we're not doing anything unnatural to force them into a specific timeline now the ones that have made decisions already and there is four that have publicly announced our tour top 20th I should say that have publicly announced their decision they want to move fast they want to get to all of the innovation.
Speaker Change: Have you heard us talking about.
Speaker Change: They want to get this behind them and be able to take advantage of things like Veeva AI.
Speaker Change: Sales and marketing and medical and bringing all those pieces together and all the innovation all the excitement so.
Speaker Change: We're doing this in a customer friendly way, we're excited with the progress. So I think we're very.
Speaker Change: Very much on track.
Speaker Change: Okay and then my quick follow up on the topic of takeaways from the Veeva commercial summit. Thanks, Paul Thats, a lot very helpful. But as you compare to the conversations you were having like last year's summit did you guys come across like Fatima executed was having increased focus on Ottawa budget biodiesel holidays, if more or less.
Speaker Change: Same as compared to last year.
Speaker Change: In terms of the feeling from the customers.
Speaker Change: Similar to last year I think they have last year, there was still some uncertainty how.
Speaker Change: How the administration was going to uphold their was in U S presidential election, and the fact that that uncertainty in a way is gone. So they are in New Zealand.
Speaker Change: Clients that they're working on.
Speaker Change: But similar and that they're.
Speaker Change: They are focused on execution and.
Speaker Change: I think leaning into digital a bit more that's one thing I noticed.
Speaker Change: Leading into the digital marketing a bit more in the data and analytics so getting.
Speaker Change: More systematic a bit more systematic in commercial.
Speaker Change: Got it thank you.
Speaker Change: Yes.
Speaker Change: And ladies and gentlemen to be able to take all of our remaining questions. In the time, we have left we ask that you. Please limit yourself to one question going forward. Our next question comes from the line of Jeff Garro with Stephens. Your line is open.
Jeff Garro: Yeah. Good afternoon. Thanks for taking the question a follow up on that last one and also some earlier ones on the momentum for cross I was hoping you could discuss the mix of customers commercial focus on digital versus in person spend and how veeva is particularly differentiated there too.
Jeff Garro: Naval both digital and in person commercial activities and help your customers evaluate the effectiveness of both thanks.
Jeff Garro: Yes in terms of the mix mix I didn't I didn't notice or sense any broad change in mix now we're not always in those discussions, but I didn't notice.
Jeff Garro: Anymore, but what I did notice, we hate losing technology, particularly cross X can I have.
Speaker Change: It has the same amount of spend in digital and double the impact.
Speaker Change: That's really what cross Lexington, Bob.
Speaker Change: Now in terms of the field or the CRM I think theres a lot of excitement about AI to say.
Speaker Change: It's not easy to ramp up or write down my field of course, but what I can do is I'd like to keep that feel of course.
Speaker Change: The same roughly and just getting more productivity out of money.
Speaker Change: Out of my team as they have more launches in more more content. So.
Speaker Change: Hum.
Speaker Change: What I'm seeing there.
Speaker Change: And our next question comes from the line of Andrew <unk> with BNP Paribas. Your line is open.
Speaker Change: Thanks for taking my question, maybe as a follow up to the horizontal CRM product.
Speaker Change: You mentioned, that's a different thing.
Speaker Change: I guess I'm wondering number one is.
Speaker Change: Those investments have been made in terms of people and head count is that already in place and then secondly is is M&A on the horizon for this particular product or is this something properly related to another opportunity. Thanks.
Speaker Change: Okay.
Speaker Change: The core team is in place of course, we will be adding to that team incrementally. When you you have to keep the same small at first.
Speaker Change: Execute was really fast speed and quality on the foundation's many incrementally add to that team and I'm sure we'll be doing that.
Speaker Change: For the next two to three year, two three or four years, so that's normal or we have.
Speaker Change: Heartbeat for that and I am sorry, so that was about the team and then you asked the second question I didn't I didn't catch it.
Speaker Change: Or was that an M&A I know you mentioned the mix would be an area that you would focus on and I'm. Just wondering if you're do you M&A will be focused on the CRM product or would it be for other.
Speaker Change: Yes, yes, yes.
Speaker Change: For M&A, we are keeping a really wide aperture on that.
Speaker Change: We see something that would be synergistic with veeva.
Speaker Change: Most likely that could be in the <unk>.
Speaker Change: Area that is horizontal applications could be CRM could be other things.
Speaker Change: We would look at that we've been very disciplined on our acquisitions and we have not had any failed acquisition.
Speaker Change: That's unusual.
Speaker Change: We like acquisitions like crossings, where we can where we can really.
Speaker Change: Create a lot of value and create a lot of innovation. So that's the type of thing we'd be looking for outside of life sciences. It could be in CRM it could be in a different area.
Speaker Change: Thanks.
Speaker Change: And our next question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open.
Speaker Change: Hi, Good afternoon. Thank you for taking the question I would like to follow up on some of the positive commentary on ETF with asking you about an update for EDC.
Speaker Change: Peter perhaps you could comment how some of those conversations progressing on new customers for EDC and any updated color on how I should think about the ramp of revenue from the customer wins that you've already announced thank you.
Speaker Change: Yeah.
Speaker Change: You touched on <unk> and I'll just spend a little bit there. We're really excited about that 99 includes top 20, and we feel like we have a pretty good path to have <unk>.
Speaker Change: Many of the top 20 on that.
Speaker Change: Just amazing and we view that as just an honor.
Speaker Change: And what we wanted to do when we get that simplification and standardization to the industry is just double down and invest in healthy industry getting more efficient.
Speaker Change: <unk>.
Speaker Change: I want the whole veeva team to know and yourselves and investors and our customers to know us.
Speaker Change: That's a signal to leave it to really double down on investment that's the type of company.
Speaker Change: We view that as a privilege. So we came out because there and I'm confident over time actually.
Speaker Change: We will get there.
Speaker Change: I think about it.
Speaker Change: We'll take time today, we have nine of the top 20 are using our agency now some of those are very early in those are multiyear ramp deals.
Speaker Change: We have a path to.
Speaker Change: Additional top Twenty's and EDC I don't I don't see anything imminent right away, but.
Speaker Change: Im sure customer success, we'll get there over time, because we have a structural advantage people want an integrated clinical platform and the clinical operational set of clinical data management, even recently, reaching out to the research side. So if we keep executing our teachers very bright and clinical.
Speaker Change: Thank you for the color and congratulations on a strong <unk>.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Alan Borkowski with Scotiabank. Your line is open.
Speaker Change: Yeah.
Speaker Change: Hey, guys. Congrats from me as well on the great quarter I wanted to just double click on how you mentioned discussions with customers are starting to reflect the general unease can you just give more color on how that developed through the quarter or what types of customers are expressing this more.
Speaker Change: Just in general appreciate more color on this thank you.
Speaker Change: Yes.
Speaker Change: Color is things that we get in personal conversations mainly one on one conversations sometimes <unk> sometimes in person. So it's not anything that shows up in our financial results for the pipeline.
Speaker Change: So.
Speaker Change: As you would expect it's multifaceted some people are concerned about drug launches in there. They are concerned about what's called that stupid date their approvals.
Speaker Change: Some open vacancies in the FDA and they wonder if he is going to fill those and whether they are going to fill those times today.
Speaker Change: Have a little logic is there.
Speaker Change: There is people concerned about.
Speaker Change: What types of acquisitions, they might do and.
Speaker Change: If they might be one well is it going to be impact on drug pricing.
Speaker Change: The executive order because that may that may.
Speaker Change: The curve or accelerate their plan.
Speaker Change: Correct for acquisition.
Speaker Change: It's just broad broad based across the life Sciences.
Speaker Change: And then for the smaller biotechs.
Speaker Change: It would be wondering about is how is this going to affect the funding environment.
Speaker Change: Pretty pretty dynamic with.
Speaker Change: Which way where interest rates go and how will this affect funding in there and they're watching the price of bonds and things and they're wondering well.
Speaker Change: When do we need another round or we can get it.
Speaker Change: Should we need to be more conservative or not.
Speaker Change: The types of discussions.
Speaker Change: Very not not dominated by one particular topic.
Speaker Change: And our next question comes from the line of Steven Valiquette with Mizuho Securities. Your line is open.
Steven Valiquette: Hi, Good afternoon, Peter and Brian Let me offer my congrats on the strong results as well really for me just a financial question you know the 79% non-GAAP gross margin of 46%.
Speaker Change: Operating margin were obviously pretty strong in the fiscal first quarter and the guidance for the fiscal second quarter for the full year, implying that the margins will come back down a little bit relative to the <unk> trend.
Speaker Change: It's just not getting too specific is there anything high level, you can point out one or two factors that just mechanically might bring the margins back down in the remainder of the year versus fiscal <unk>.
Steven Valiquette: Hey, Steven Q.
Steven Valiquette: Q1 was a great quarter for the cluster Veeva team and you saw that reflected in the margins. The part that doesn't always show up in the margins is the impact that we'll see in years to come.
Steven Valiquette: When you look at the margin specifically in the quarter about three quarters of the outperformance was driven by revenue and so that was mostly the usage based elements of cross X and the faster timing of services delivery.
Steven Valiquette: So things that we don't expect to be a recurring benefit to margins through the balance of the year.
Steven Valiquette: We also saw some benefit from expenses, which was really timing related factors as well things that occurred later than we'd otherwise expected.
Steven Valiquette: So when you put all that together, we saw a high watermark for margins in Q1.
Steven Valiquette: And then we see it return back to 44% in Q2, which is about what we expect for the balance of the year.
Steven Valiquette: Okay.
Steven Valiquette: Okay. Thanks.
Speaker Change: And our next question comes from the line of David Larsen with BPH. Your line is open.
David Larsen: Hi, with regards to cross X you mentioned investments into cross section you mentioned the word provider.
David Larsen: With respect to the actual data itself does it include like obviously, the retail sort of data, but does it also include like the specialty script data for medications that can be supplied in a hospital does it include like like part B drugs drug administered in the clinic in a skilled nursing facility and then when.
David Larsen: He used the word provider would that also include like facility data. So if a hospital wants to look at all of their volumes inpatient ambulatory and so forth is that also including cross X or are the plans to eventually included there. Thank you.
David Larsen: Yes, David sources data network, which supports cross six and it also supports compass. It does we're a core retail specialty drugs specialty pharmacy administered in the US hospital, all the types of dogs and especially it's good.
David Larsen: What we call complex therapies and those are.
David Larsen: Definitely ones that are youre, not just going through retail pharmacy.
David Larsen: Picking them up that's.
David Larsen: One of the very unique things about our data sourcing strategy. So for example, a compass.
David Larsen: I know you asked about prospects, but for example, encompass we can project project data sales data for about 4000 brands across retail and non retail and we can do that because of our data sourcing strategy that data sourcing strategy makes us able to do great measurement and audiences also.
David Larsen: On classics, so in classics, what Youre trying to do is figure.
David Larsen: Figure out what segments do you want to expose to media and then was that effective at which at.
David Larsen: Which immediate points was that effective at driving visits to health care providers and then.
David Larsen: And the uptake of the medicine.
David Larsen: So it's a pretty comprehensive data network, that's what we set out to build when we acquired cross it's about five years ago and is that really really great to see it coming to fruition now.
David Larsen: Okay, great. Thanks very much.
David Larsen: Thank you.
Speaker Change: And our next question comes from the line of Faith Bruno with William Blair. Your line is open.
Speaker Change: Hey, guys. Thanks for taking my question I guess just.
Speaker Change: Diving into someone again.
Speaker Change: That their customers are feeling good about veeva, who maybe from a broader industry perspective, what challenges are they bringing to you what's top of mind for amendments and has there been any shift when you compare the conversations you've had back in <unk> profit maybe more recent conversations you've had recently as we are continuing trying to navigate the changing impact.
Speaker Change: Yes, so I'll take that.
Speaker Change: Yes, it's a good one challenges and how has that shifted over time.
Speaker Change: So.
Speaker Change: Remember where the industry is.
Speaker Change: <unk> been in a place where in the commercial side. We've helped many companies to be able to connect up a lot of their software systems. We're now we're going through the migration process. So that's certainly a big topic of conversation.
Speaker Change: But we the industry still has fragmented data.
Speaker Change: And getting the data work together getting the data into the software. So you can make decisions and you can get insights fast about that gap is still a challenge for the industry, it's not a problem yet.
Speaker Change: So the topic of our you heard Peter talk about this connected software connected data.
Speaker Change: That's resonating and it's a challenge that it's very clearly an unsolved problem in the industry.
Speaker Change: Our approach to that harmonizing the datasets from <unk> with the software fundamentally solving it at a very foundational level the data model.
Speaker Change: <unk> share of data.
Speaker Change: Attributes and elements across all these different datasets, creating us connected environment. So that's top of mind and that leads to things like helping them be more efficient helping them get insights to the right people faster to make decisions, helping them do AI.
Speaker Change: So thats an area and then second is.
Speaker Change: We talked a lot about the excitement around AI, but theres also a lot of unsolved problems in the AI space and part of that is bringing together or the industry hasnt, yet been able to bring together very industry specific processes.
Speaker Change: <unk>.
Speaker Change: Deep industry specific AI.
Speaker Change: That's a problem that.
Speaker Change: They've made investments they haven't often seen a full return on their investment and some of the projects and I think that's another area, where they are excited about our ability to help them over over time.
Speaker Change: So those are those are some specific examples.
Speaker Change: That's helpful. Thank you.
Speaker Change: And that concludes our question and answer session I will now turn the conference back over to Mr. Peter Gassner for closing remarks.
Speaker Change: Yeah.
Speaker Change: Thank you everyone for joining the call today and thank you to our customers for your continued partnership and does the Veeva team for your outstanding work in the quarter. Thank you.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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