Q2 2020 Earnings Call
Good afternoon. My name is Shawn told and I'll be your conference operator today at this time I would like to welcome everyone to Veevas fiscal 2022nd quarter results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session.
If youd like to ask a question. During this time simply press Star then number one on your telephone keypad. If you would like to withdraw your question press. The pound key. Thank you Rick Lund Investor Relations Director you May begin your conference.
Good afternoon, and welcome to Veevas fiscal 2022nd quarter earnings call for the quarter ended July 31st 2019.
With me on today's call are Peter Gassner, our Chief Executive Officer, Paul shower, SVP of commercial cloud and Tim Cabrall, Our Chief Financial Officer. During the course of this conference call. We will make forward looking statements regarding trends our strategies and the anticipated performance of the business. These forward looking statements will be based on management's current views and expectations and are subject to various risks and uncertainties. Actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q , which is available on the company's website at www Dot Veeva dot com under the investors section and on the Fccs website at Www Dot ATSI Si Dot Gov.
Forward looking statements made during the call are being made as of today August 27, 2019. If this call is replayed or viewed after today. The information presented during the call may not contain current or accurate information.
Veeva disclaims any obligation to update or revise any forward looking statements.
We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.
On the call. We will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in todays earnings release, which is available on our website and as an exhibit to the form 8-K filed with the FCC just before this call.
Finally, I'd like to welcome you to join US at our annual analyst and Investor Day on October 2nd in San Francisco. If you haven't received an invite and we'd like to attend please feel free to reach out via email at the address IR at Viva Dot com.
If you can't join in person the event will be webcast with both a live and archived versions available on our Investor Relations website.
And with that thank you for joining us and I will turn it over to Peter.
Thank you Rick and thanks to everyone for joining us today.
Q2 was another strong quarter with results above our guidance total revenue was 267 million up 27% year over year subscription revenue grew 28% year over year and our non-GAAP operating margin was 39%.
Neither has now passed a billion dollar revenue run rate.
This is a year and a half ahead of the target we first laid out in 2015.
With the customer successes are driving force, we were able to exceed our goals through exceptional focus and execution. Thank you and congratulations to the Veeva team.
Today, We also announced our CFO Tim Cabrall is retiring next year after a 30 year career and 10 years at Viva.
A search for his replacement is underway and Tim is staying at the EBIT through the hiring and Onboarding of our new CFO to ensure a smooth transition.
I'd like to express our appreciation and thanks to Tim.
He is an exceptional leader having helped guide the both from a start up to our current scale. He also built a strong team.
Working with him at Viva and Peoplesoft before that has been a true partnership that I valued deeply.
Now turning to the details of the quarter.
Strong momentum in commercial cloud contributed to our outperformance in Q2 in core CRM, we continue to extend our leadership position with new SMB customers and additional enterprise expansion.
And customers continue to adopt more CRM add ons.
This happens on a product by product and region by region basis, Let me give a couple of examples.
Veeva CRM engage had one of its strongest quarters as for top 20, Pharmas expanded their use of engaged a new field teams.
Customers are attracted by the deep functionality and multi platform support of engaged and the very tight integration with CRM.
We also had an important design win at a top 20 pharma for events management.
This customer has been using core CRM globally for many years.
And recently decided to expand their beaver relationship to include events management in more than 90 countries over time.
They chose either because we have a deep functionality and professional services capabilities needed for a global events management rollout.
They were placed multiple custom systems, and spreadsheets, leading to a more efficient and compliant global process.
It's great to see this expanding relationship with a long standing customer.
Turning to vault, we continue to have great momentum.
Well now has nearly 650 customers and as of Q2 represents more than 50% of total revenue.
This is an exciting milestone.
When we started involved a number of years ago, the potential was clear to me.
And as I look ahead. It's also clear that we are in the early days of ball.
This quarter, a newly independent top 20 medical device companies standardized on vault across the organization, including clinical quality regulatory and commercial.
With the ability to start from a clean slate they chose vault because it's the only solution to provide best in class application suite on a single modern cloud platform.
Our customer success focus and commitment to the medical device industry was also key.
In clinical they will use Vivacit E T M a C Tms and C.D.M.S.
That's focusing on Cdms.
They chose Veeva cdms over their incumbent system for a few reasons.
First they were looking toward the future and long term partnership so they liked our pace of innovation.
They've seen veeva cdms evolve rapidly over the past 12 months and are excited about whats ahead.
They also saw the BBC Dms is well suited to running all their types of studies. It can handle the complex studies, but also it's practically you to use for small studies that are built on short notice.
And they also one clinical data management and clinical operations all on a common platform to gain operational efficiency.
We now have a top 20 pharma and the top 20 Med device company has lighthouse customers for Cdms. These early adopter accounts are very important and their success is a major focus for the team.
The Tms is also progressing well we continue to win more deals and now have 50 customers signed in just two years since the product was released.
That's amazing momentum in a highly complex area.
Our progress here speaks to the significant need in the market for a modern see Tms solution.
We believe faulty Tms is poised to be the leading solution over time.
Drilling down into quality, we signed our 10th top 20 pharma for vault Qualitydocs.
Following their success with vault promomats en masse and submissions this customer selected quality docs as part of that move away from a legacy content management platform.
On the Q M S side of quality, we ended the quarter with more than 100 customers.
The need for modernization is driving the move to Veeva in this area as is the benefit of having to amass integrated with Qualitydocs and training on the vault platform.
This is another great example of the innovation, we're bringing to an underserved market.
Finally, I'd like to give an update on our efforts outside of life Sciences.
I'm pleased with the progress, we're making within our three focus industry CPG chemicals and cosmetics.
Since announcing the new false claims product last quarter, we now projects in place at three top CPG companies.
We're also executing well in chemicals and cosmetics.
Customer success drives our business in all industries.
This quarter, we had major go lives at a top 20, CPG a top 20 cosmetics company and two major go lives in chemical.
In closing, we had a great quarter.
Our results reflect the customer trust, we have gained through consistent innovation focused execution and our commitment to their success.
With that I'll turn it over to Tim.
Thanks, Peter Q2 was another quarter of solid execution across the board total revenue was $267 million up from 210 million one year ago, a 27% increase.
Momentum across volt continues with Volte now representing 52% of total revenue up from 46% in Q2 of last year.
Subscription revenue grew 28% to 217 million from 170 million last year.
Well represented 48% of subscription revenue up from 42% a year ago.
Year over year growth benefited from particularly strong bookings in the first half of the year and from 190 basis points of tailwind from six or six due to the recognition of unbilled revenue from multi year orders with ramping fees.
Services revenue was nearly 50 million up 24% from 40 million one year ago.
We expect services revenue to be roughly flat sequentially in Q3.
We continue to see strong profitability in Q2.
non-GAAP operating income came in about 104 million a 39% operating margin above the high end of our guidance. This was primarily driven by outperformance on the top line.
We made good progress investing in the business with a record hiring quarter.
Approximately 180 net new employees joined visa in Q2, bringing our total head count to 2827 up from 2376, one year ago.
Moving to the balance sheet deferred revenue was $329 million compared to $364 million at the end of Q1.
This resulted in calculated billings for the quarter up 234 million, which was ahead of our guidance of 220 million.
This was a function of a strong bookings quarter outperformance in services revenue and better than expected billing duration for the new business closed in Q2.
Please remember that there are numerous factors that make year over year comparisons of this metric highly variable on a quarterly basis. Therefore, we do not believe it is a good indicator of the underlying momentum of our business and we do not manage to it internally.
Our subscription revenue guidance and calculated billings guidance for the full fiscal year are the best indicators of our momentum.
Looking ahead, we expect calculated billings of roughly 185 million in Q3, and roughly $1.135 billion for the full year, which is a $15 million increase from the high end of our guidance provided last quarter.
Elsewhere on the balance sheet, we exited Q2 with over 1.4 billion in cash and short term investments up from over 1.3 billion at the end of Q1.
This increase was driven by our performance in cash from operations, which came in at a 100 million and included 17 million in excess tax benefit related to equity compensation.
For the full year, we now expect cash from operations to be 345 to 350 million, excluding this excess tax benefit.
Let me conclude by sharing the outlook for Q3 and for fiscal 2020.
Next quarter, we expect revenue between 274 to 275 million non-GAAP operating income of 103 to 104 million and non-GAAP net income per share of 54 to 55 cents based on a fully diluted share count of approximately a 159 million.
For the year, we expect revenue in the range of $1 billion and 62 million to 1.065 billion.
We expect subscription revenue to be in the range of $871 million to $874 million and within that we now anticipate commercial cloud subscription revenue growth between 13% to 14% and volte subscription revenue growth of at least 40%.
For fiscal 20, we expect non-GAAP operating income of 401 to 404 million a margin of about 38% roughly a 100 basis point increase from our previous guidance.
Coming off of a record hiring quarter, we plan to continue investing for customer success and future growth with an aggressive hiring plan for the remainder of the year.
We are now targeting non-GAAP net income per share for the year between $2.11 and $2.13 based on a fully diluted share count of approximately 159 million.
Before I wrap up I'd like to share some additional thoughts on my retirement as Peter mentioned, we've kicked off the search for my replacement and I will be here through the full onboarding.
As I retire from an incredibly rewarding 30 years and technology. My 10 years at Viva have been the most fulfilling of my career.
It has been a privilege to be part of such a talented team and a truly great company.
The impact Veeva is having on our customers and the industry is remarkable.
This is evident in our quarter's results and our outlook for the back half of the year.
The opportunity ahead, along with the team's focus and consistent execution sets us up for a trajectory of long term growth.
As always thank you for joining the call and I will now turn it back to the operator for questions.
At this time I would like to remind everyone in order to ask a question that stars and number one on your telephone keypad, we'll pause for just a moment to compile the queue any Ross.
Your first question comes from Bob Evans.
William Blair Your line is open.
Hey, guys. This is actually idling back or on for both on I guess I just kind of wanted to start off around Nitro and Andy adoption. What are you guys necessarily hearing from customers and how is the implementation process gone. It looks like you are now projecting cloud growth of 13% to 14% for the year.
How much of this is kind of attributable to to the nitrate when Andy adoption.
Yeah, Hey, John This is this is Paul thanks for the question so with regards to Nitro we added.
Some additional customers this quarter last quarter, we talked a lot about some of the early customers that we had who were on stage at our Big summit event and they were talking about there very implementation now they've been life for a period of time and Thats going extremely well. So the product is certainly working in the early market.
I would say, we're we're feeling a little bit of headwind from some of the anti competitive behavior from my two yes. So some of the same behavior that day.
They have demonstrated with networks are also demonstrating with my true. So we have to balance some of the success that we're seeing with these early adopters with that with some of the headwinds that we're seeing as well.
No I would say with Andy.
We're focused on getting the product to the right level of maturity and also getting some of those early customers kind of signed up and life. You know this is still early marquee early days really for both my true in for Andy So from a contribution standpoint.
It's going to take some time before they're material and meaningful impact.
From a contribution perspective.
Okay, great. Thank you.
And then I guess kind of just in general as you look at the geopolitical environment around drug pricing and regulation can you kind of remind us does that have any effect around you guys. Just go to market here and then are you seeing I mean, what are you seeing and hearing from customers around this as well. Thank you.
Yeah. Thanks for the follow up so it certainly has the potential to have an impact on how we go to market and also.
More importantly, the types of relationships that pharma companies have with their suppliers, we haven't seen any of that yet.
No drug pricing is has the potential to have a very significant impact across the industry.
It would affect all suppliers.
Veeva being some of the same in that same grouping what I would say is we haven't seen any impact yet.
I'd also say that as they have more pricing pressure and as they have more cost pressure the balancing side of that that may create a tailwind is the fact that companies often look to technology to try to drive efficiency. So I think there's some.
It's a little bit of a potential headwind, but there is also some opportunity for technology to drive efficiency and cost savings as well.
Okay, great. Thank you guys for taking my questions and congrats again on the quarter.
Thank you.
Your next question comes from Brad Sills with Bank of America Merrill Lynch. Your line is open.
Oh, great. Thanks, guys for taking my question just one on Cdms, obviously, you're seeing traction there and in the top 20 segment of the market I know you've been working on features as you're kind of moving up with reference building. There are there any features that particular you'd point to to say well now cdms is ready for these top twentys and maybe we're hitting a tipping point.
It's a good question Brad this is Peter.
In terms of features.
You can always add more features that's for sure suffers never done, but we're we're pretty well feature complete no I would say of course features need to be rounded out over the years.
So what what people would look for now is just proven success and some are going to want to be more early adopter ish than others. So I think we're in the normal technology adoption lifecycle and this is a critical area for life Sciences. So it's not something that they're going to switch out easily right or four without thought so.
We are doing well and features and in fact in some cases, we're we're really getting out ahead of things because we're taking a fresh fresh approach and since you asked about a product I'm going to give you a detailed product to answer because I liked that stuff.
When when clinical data management started many years ago electronic clinical data management started it was about collecting data points of the patient now as medicines and therapies have been come more complex is becoming more important to collect qualitative say medical assessments from physicians.
From third party physicians, who are assessing the data points that's been an after thought in medical device in Cdms systems for many years.
And because there was no innovation in the market that just persisted now Enviva comes out we actually put excellent features in for that and so in some cases in some feature areas, we're actually taking a fresh approach and leap frog in the market and this medical assessments is one of those areas.
That's great and then.
One more if I may please just on a commercial you obviously raised the outlook for this year.
Where would you point to in particular on the outperformance it sounds like you've got a new customer win there, but also you're you're executing well on.
Some of these add on attaches more company wide.
And any color you can provide on that please thank you.
Yes, Hi, this is Paul I'll take that one.
So the outperformance in commercial was driven by a couple of factors first CRM we're seeing.
Our enterprise customers expand into their regions a faster than expected. So that expansion is continuing to happing and and you know we will continue to see a bit more of that in the in the enterprise side were also seeing strength in small and medium size companies. So these three companies that are pre commercial lot of the net new wins here are pre commercial companies and they're they're launching their first product and what they want to do is they want to they want to launch and have the most successful launch.
Based on modern technology, So we see a lot of success there and the other trend that's happening there as they often go in with Veeva CRM and the number of the add ons.
In the initial in the initial purchase so we see that.
That is a bit of a trend that is continuing.
So the sum of the add ons to CRM has strength I would also point to a few of the add ons that are kind of outperforming what we'd expected.
So.
Engage is one area, where a number of enterprise customers have began global expansions on engage that will take time it will happen over over months, if not years, but we're seeing that trend continue where they are able to demonstrate results and build out that business case, and we've also seen great performance better than expected with approved email and also for open data and I think what's driving that is the industry trying to move to to digital a bit faster as well. So we're seeing strength in both in CRM and the add ons.
Great. Thank you so much Tim congratulations on your move you will be missed.
Thank you Brad.
Your next question comes from Sandy Draper with Suntrust. Your line is open.
Thanks very much for taking my question I guess my question is going back to the hiring side. Tim I think you commented you had maybe the most tires.
Of any quarter I think I've heard that correctly, just trying to get a sense of how.
What's driving.
That and how how much wage inflation is there are you competing against other players around the life Sciences area or is it really more competing against tech people little bit, but just trying to get a sense of you guys keep growing and selling is on the topline how hard is it going to be to hire to support that demand. Thanks.
Yes, and it is Tim Thanks for the question and Peter I don't know if you want to add anything here on that on the hiring side of what we're seeing.
Having a couple of things have contributed to what was our strongest hiring quarter to date, you you identified that correctly sandy.
Number one we have a very strong university hiring program, we call generation Veeva and as you can imagine typically you'll see in Q2 and sometimes its builds a little bit into Q3, but mostly in Q2 is when we're hiring a lot of folks into that program. Both on the engineering side and the consulting side.
Matt has been a focus of ours over the last couple of years as our thesis is we really want to continue to grow industry cloud expertise.
And we can do that from the University folks as they grow in the company here at Viva.
Secondly.
And this may get to your wage inflation question as well Sandy well, we've done a very nice job I think is weve opened up new hiring markets for us or focused more of our energy on newer hiring market. So.
Obviously pleasant tenant and a greater Berry is a very strong market for us and we continue to focus here, but we've also over the last couple of years really focused on Toronto in Columbus as other areas, where we're finding both products people some customer service people and some back office people as well so I think the expanding the number of markets. We can hire from has also helped in our execution around hiring Peter I don't know if you've got any additional.
Color there Tim summed it up well, it's about expanding locations you have to do that and then in terms of competition competition. It depends on the segment, whether it's fresh out of college, Okay that tech companies and consulting companies in engineering, you're competing against Tech companies in the field for general sales physicians you may compete against all Tech companies and then in some of our domain specific areas like strategy, Yes, there were competing against other life Sciences specific.
Companies. So it's always the same right you have to compete.
To field the best team, that's where you get the best company.
Great. That's really helpful. Thanks, and congrats on another great quarter.
Thank you thanks Sandy.
Your next question comes from Kirk Materne with Evercore ISI. Your line is open.
Oh, Thanks, very much Peter I was just wondering if you could talk a little bit about the outside of life sciences or they are less business just in terms of referenceability and kind of where you are there and.
And what's your thoughts might be around sort of upping. The sales motion you. If you are getting closer to referenceability. Thanks.
Yeah, we're happy with our progress outside of life Sciences still early days. So our concentration really now is in some of these large customers we have.
Rounding out the products, we are getting more referenceable over the time and you won't see a hockey stick type of effect, but more of a.
Evan even acceleration of the market and that's what we're seeing.
Okay. That's helpful. And then maybe just on your six or six comments is there anything left on that front in terms of sort of ramp deals that we should be thinking about I guess exiting this year and into next year.
Yes, Kurt Thanks for the question.
In terms of success takes as you know.
We get a little bit of a revenue uptick given the new revenue guidance around unbilled revenue of multi year deals that have ramping fees and that are noncancelable. So really at the end of the day it boils down to the mix of those types of deals.
And there are there are a number of you know we're in the early days of vault, which is where we see these and so there's certainly an opportunity where those types of deals and or the mix of those deals either continues in a steady way or or grows or contracts. So it's not something we specifically forecast and as I think I said last quarter I'll say it again here as we see the actual impact of that.
Be material to the results as I've done in the last two quarters I'll make sure I give that transparency and color right. We think about it internally sort of like axe in that way when its material companies like US we'll talk about it.
Super Thanks, very much and congrats on a great run.
Thanks Kirk.
Your next question comes from Ken Wong with Guggenheim Securities. Your line is open.
Great. Thanks for taking my question.
Obviously, a couple of good cdms wins these.
Two quarters.
Yes, Peter how do you see the the recent acquisition of Medidata impacting the CMBS market.
That is a general kind of a tailwind or headwind for you guys.
Well the acquisition of mitigated by the so certainly it caused a lot of questions about from customers, which is normal and some of those questions were.
And they would ask customers, who would ask of us.
And but we really haven't seen any change in the market. When we look at CMS, It's really about building the best products getting customers getting them live and happy and successful in really innovating and the market. So we have really seen no effect.
Of the acquisition so far how it will play out in the future.
That's of course unknown, and that's not where we'll focus but real really focusing in on our customers now.
Any sense, if if that might give you guys, maybe a bigger window to to reach out to customers and I guess is it sort of a change in terms of who they have to deal with now or has that also been fairly neutral at this stage.
So it will cause a customer to consider that's probably one thing they will consider as they're evaluating a system, but it's not something that we've seen materially affect any of our business or affect any type of competitive dynamics at this time.
Got it and then if I can squeeze one in for Tim.
You really touched on duration, helping billings.
Okay.
Can you talk about what's causing this and should we expect this trend to continue.
Ken Thanks for the question. So that was the billings beat that was a smaller component of the billings beat.
Probably roughly half of the billings beat that we talked about was stronger bookings in the quarter as it relates to duration. It's it really becomes a mix of the deals that we closed in any particular quarter and it can change based upon when the customers renewal date is and depending upon the length of the add on order it could depend upon whether the customers that we're closing in a particular quarter are more quarterly billers versus annual so theres a lot of different factors, which play in there can and it really depends on the mix as to whether or not.
That creates a little bit of up tick in billings now you can imagine with the complexity. There. It's we're likely on the conservative side as we think about forecasting for that particular component, but as I said that was not the biggest part of the beat in the billings area.
Got it great. Thanks, a lot and congrats on your well deserved extended vacation.
Thanks, Ken.
Your next question comes from James Rutherford with Stephens, Inc. Your line is open.
Yes, thanks for taking the questions and congrats on the quarter a couple from me first on artificial intelligence, we observed a rising your innovation around AI of course, we have Andy and then AI for Promomats on recently launched a safety Dot AI. So the question is is it fair to say that you all will just apply a every aspect of commercial involved and I guess less down the road as well and the second part of that question is is it a kind of a meaningful Tam expander or are these just mostly feature additions that you will kind of continue to use to differentiate the product.
So a little help on the context for AI.
Okay, James Yeah, Hey, guys, it's a long term trend.
I remember.
When I was getting my computer science degree in the late Eightys you know the early days of AI and it's continued and it's getting more.
Useful and impressive as they go on now in terms of Veeva, you will see AI applications from us different applications that we can make now because the capabilities are there that we couldn't make before so you mentioned safety that AI and Andy those are fundamentally AI applications brand, new AI branded applications for US and then we'll add AI into many areas of our existing applications. So the automatic claims linking the promomats. The approved notes for recognizing techs sentiment in CRM. So it will.
I see what increases our Tam as when we make more applications AI over the years is going to allow us to make more applications. That's probably the best way to think about it and it's going to be a gradual expansion.
Hi grows over the years the capabilities, it's not a not an on and off switch.
Okay helpful. Thank you for that and then Paul one for you. If I may we took note of the Newell soft partnership announced recently I'm. Just curious if you can help us understand how it fits with your your Nitro strategy mule soft, obviously being a leader and I passed an ATM management. So I think if you will that just kind of a way to grease the skids that help.
Life science companies get that data into Nitro more quickly and easily just some thoughts around how that fits from a technology perspective. Thank you.
Yes, so we actually think about new will soften a little bit differently in the focus for the announcement that we had with salesforce around Mike around meal Soffe was focused on her vault applications.
So theres different mechanisms on getting nitro data into nature that think of that separately.
As as our customers are expanding their fault footprint and getting more and more vault applications and really kind of these mission critical areas the number of applications or systems that they need to integrate too.
Becomes higher and higher so what we look at.
Well, we think of that you will soft connector as a way to make those integrations, a seamless more seamless faster easier and easier for customers to support and maintain overtime.
So I think about mule soft more specifically as it relates to to vault applications, which is the kind of the focus of that that that integration today.
Okay. Thanks for that color nice quarter.
Thank you. Thank you.
Your next question comes from Rishi Jaluria with D.A. Davidson Your line is open.
Hey, guys. Thanks for taking my questions Tim Congrats on your achievements that we have over the past 10 years, they've been a pleasure I think you said a great standard for brother SaaS Company Cfos to follow so on that I I would love to hear what are you looking for in your replacement to kind of ensure that it's going to be a very seamless transition from you to whoever takes over your seat.
Yes, reaching first thanks for the kind words.
I think as Peter and the board and I look for the key attributes of our replacement.
If someone who as I think I've tried to build is can be a really good business partner to Peter to the leaders within the company and can connect.
To the board as well.
Someone who has some level of domain expertise around SaaS would be very helpful. As well because as you talked about the pattern recognition of what are the key metrics and the things that make sense to a SaaS business again, it doesn't have to be someone who has been in SaaS for 20 years that some familiarity would be very helpful.
I am more of a finance person.
Our Chief Accounting Officer, Michelle is much more of an accountant.
So maybe we fit a mold more like me, where it's more of a finance background.
As opposed to an accounting background, but I wouldn't I wouldn't rule out either of those but I think I would lean in that direction.
And then really someone who has the level of passion that I think is required for this job and I'm really wants to take on what I think is a unbelievable opportunity at an unbelievably.
Axle company like Veeva so.
I don't know if that was a resume and description, but theres some of my thoughts.
Great. That's really helpful. Tim and then Peter one for you.
If I'm not mistaken I believe I'm showing your joins next month I would love to kind of hear your perspective on what do you expect or what we should hope for out of Tom joining maybe his first 90 days at Viva, especially given that the R&D summit is coming up in the next week and a half two weeks. Thanks.
Yes, Tom is joining next month and he's a quite accomplished veteran brings a lot of customer relationships and just knowledge of operating at scale teams of thousands of people and revenues into the billions that had accenture. So what Tom there is Tom will focus on forces in the sales area as a president and CEO the field excuse me not to only the sales with the field area. This is the customer success. The sales. The services. This strategy area, Tom will be based on the east coast as well Philadelphia's. So he will he will cover that region then.
Tom will be one of the key members of the management team and partnering with me Tom strength again is in deep understanding of life sciences execution that scale and executive relationships and team building and Thats, what I expect Tom will do for us here.
Great. That's helpful. Thanks, Peter Thanks, Jim.
Thanks ratio.
Your next question comes from David Hynes with Canaccord Genuity.
Open.
Hey, Thanks, guys.
I wanted to follow up on the CMS line of questioning.
As I think about purchase decision considerations say for a top 20 is there a competitive advantage to sticking with an incumbent where there may be a data history or.
As each trial, such a unique entity that in theory, it would be easier to cut over to a new vendor.
Okay.
Good question each trial is independent in its data.
And the long term repository of the data, meaning where it is today to go after the trial is finished that's an independent system that's not normally.
Collected connected.
It's not normally the same as the clinical data management system. It's a normally have a you can think of it more of a a data repository or a data warehouse that separate so that's not that's not an impediment what what is hard for people when they would considering switching is.
Your clinical data management system has to be integrated with your other systems. If you bring in a new clinical data management system. That's other integrations to write another testing and validation to do because for a while for a considerable period of time, you will be running multiple systems. So thats a tax so thats why this type of change is not is not considered lightly.
Yes, Okay, and then to your question.
Yes, no that's perfect that makes perfect sense.
And then maybe kind of a bigger picture question as we think about product roadmap for vault.
Maybe over a three year period, or so should we should we expect new efforts to predominantly stay within life sciences or are we getting to the point, where the suites pretty built out so maybe we start to see more in new verticals and.
I want to be clear I'm, not asking about sales execution or opportunity I know there is still a huge runway life sciences, but more just kind of how the product evolves.
I would probably call.
Well, there's a history I think of.
Honestly, what I believe is there's a history of underestimating the.
Potential inside of life Sciences, and I I saw that in 2010 I saw that in 2015 and now as we approach 2020, I also see that.
So.
I think a lot of our expansion can still come inside of life Sciences, I think were actually relatively early in the industry cloud for life Sciences as surprising is that would seem yes. Some proof of that is in okay look the clinical data management area for US is brand new the safety area is brand new but there are more things that can be done in life sciences, especially as we accumulate more and more data.
About life Sciences. So we will certainly we are doing well outside of life sciences, but I wouldn't underestimate inside of life Sciences.
That.
Right I would say also just in general as our core platform of Veeva vault. That's in its very early days I know how these things play out you know.
When you really invest in the platform, that's something actually that you monetize.
We're talking over 2030 years and Veeva you got to remember is only 12 years old yes, but fault is only eight years old.
So it's still very early days.
Okay very good Thats helpful. Thank you and Tim Congrats and good luck.
Thank you Jay.
Your next question comes from Brent Bracelin with Keybanc capital markets. Your line is open.
Thank you I guess, one for Peter and one follow up for Tim If I could Peter.
It's clearly been an incredible first half for Veeva milestone quarter here crossing over $1 billion run rate.
I think there's a few companies that they're able to do this with accelerating growth across two major product categories. So things are clearly humming right now.
My question is more about next year as you look at the product pipeline customer opportunity.
What are you most excited about looking out into next year, given things seem to be going really well right now, but what are you. Most excited about next year and then one quick follow up for Tim.
Oh Gosh next year, it's just there's a lot of excitement.
We're bringing in new people to the company at an amazing pace.
I was just in Denver last.
Friday, and let's see Friday, Thursday night, Friday, and Saturday with close to 250.
We call generation Veeva people. These are people that are two years or less out of college and they're in consulting and R&D and commercial and engineering.
Pleasanton and Toronto.
Im just excited about the the workforce we're developing here. So that's on one spectrum on the other spectrum we are.
Bringing in people like Tom Schwinger, and we're growing that middle area. So I'm I'm. That's overall, what I'm excited about I'm excited about close to 3000 people all with a common culture and really learning how to Hum together now if you get into the product area I'm really excited about clinical data management and safety that is new areas that are just super ripe for innovation and very early.
And I'm excited about resurgence in what we can do in commercial cloud and some innovation, we can bring bring in there so.
I'm excited about every year.
It's going to be a great one and it really piqued my interest like okay. Yeah, it's going to have got to get get after that I think is going to be a great year.
I'm not I don't have any financial guidance do I, Tim no not yet financial guide, but overall you know it's I'm really excited about the Mojo of the company and that's created by the people coming into the company and the common culture, where people can work together and enjoy it at greater scale, it's a beautiful thing.
Absolutely Jim just.
Now again extend my congratulations on the retirement here certainly well earned a great run and you will be missed.
Just drilling down into the commercial cloud gross I mean.
We are seeing here now the second quarter of accelerating growth there, what's driving the improving visibility you guided up for the full year here a little bit on the growth profile. There are these engage and event management rollouts big enough to kind of drive a sustained improvement in growth there or.
Should we think about these things is you know kind of you know.
A couple of quarter Rollouts that kind of will then kind of roll off help me understand the improvement on the commercial cloud gross side.
Sure and Brent Thanks for the question and thanks for the kind words.
Yeah. We're we're very pleased with what we're seeing in commercial cloud I would say that the recent uptick in growth that we've seen in the first half of this year, which is it.
You've seen that impact our guidance.
It is mainly due to particularly strong bookings in the last few quarters and I would echo what Paul said earlier in terms of where we're seeing the strength from a bookings perspective, it's in CRM enterprise expansions that are going faster than we had anticipated. It's in SMB wins that are better than we had anticipated and as Paul said, we are seeing.
Some particular strength in some of the areas some of the add on areas Brent I should say.
Namely engage which Peter talked about approved email and open data.
So I think that's what we're seeing particularly strong bookings in the last three quarters, which is really driving.
The uptick in revenue and you remember we've always characterize this as a steady growth business over time.
Even given this performance that view Hasnt changed.
In our minds.
Okay helpful color. Thank you.
Your next question comes from Karl Keirstead with Deutsche Bank. Your line is open.
Oh, Thank you I've got two fairly prosaic numbers questions for Tim So Tim maybe I missed it but did you update the full year Billings guide I think on the last quarter of 1.12 billion and if I recall, you suggested that 41% to 42% of billings might dropped in the fourth quarter just wanted to make sure I didn't miss that.
Yeah, Carl Thanks for the question the updated.
Billings guide for the year was 1.135 billion, so an increase of $15 million.
Over last quarter.
And that you know we saw that in part being driven by the outperformance in Q2.
Got it okay. Thanks for that sorry, I missed that and then the second question was on your operating cash flow guidance.
Tim which was for the full year ex the tax benefits a little bit above our estimate and.
I calculate a first half operating cash flow growth of the Super strong 40% in the first half so congrats on that performance and I'm just wondering.
What it from is it just a function of the operating margin outperformance flowing into the operating cash flow line or is there a little something extra thank you.
Yes, so if you exclude the excess tax benefit. Carl then you have the answer correct. It's it's really the operating income performance, which.
As you've seen is growing at a faster clip than our topline revenue and that's contributing to the cash flow and I guess I would be remiss for not calling out my team as well.
Who have done a phenomenal job.
With the help of the field team.
And certainly the health of the customer success that we've driven over time to really have another strong collections quarter and really had an amazing collections first half, so, but but you're right. It's being really driven off the operating income and when you add in the excess tax benefit that is even a higher growth in terms of operating cash flow year over year than operating income.
Got it okay, Tim Thank you.
Your next question comes from Chris Merwin with Goldman Sachs. Your line is open.
Okay. Thanks, a lot for taking my question just as it relates to quality. One I was wondering if theres any update to the revenue run rate there and then maybe at a product level can you just talk a bit more about the traction you're seeing with the newer claims product I think you might have mentioned some strengthened and CMG, but just curious what types of customers are taking that product so far thanks.
And in terms of the claims product.
We have our early adopters there the products is very very early.
And they're all in the consumer package goods, which is where claims is is generally going to be targeted and it's going well.
But early with that we're implementing with the first customers iterating the the product.
In terms of revenue, we're happy with the progress outside of life Sciences, but thats not something that we breakout at this time and we'll give you further updates as we have them.
Okay, great. Thanks, and then just one follow up on a bigger customers. It sounded like last quarter that was it's going really well just just curious if there's any update there and you are still on track to reset I think target of 20 by the end of the fiscal year.
Yeah, Chris This is Tim So I think you've characterized it correctly we are.
Continuing to build deeper and larger relationships with our customers and not Ben.
A function of two things I think one well three probably one our customer success, the innovation of our products and the expanding product portfolio, which gives us the opportunity to make a larger impact.
Or or create a larger impact for our customers.
We typically have updated that number in our analyst day, So why don't I hold off and we'll probably give you an update on the on that in the analyst day.
You remember that that was part of the recipe to get to the billion revenue run rate, which we did eclipse this quarter and Peter mentioned that in his quote.
And were very proud and excited about that milestone and and the team has done a phenomenal job of executing over the last five years or four years.
Since we gave that that target.
Okay Thats helpful and all the best in retirement.
Thank you.
Your next question comes from Tom Roderick with Stifel. Your line is open.
Hi, It's actually Parker Lane in for Tom Thanks for taking my question.
So one area, we haven't heard as much about Volte recently is for all of that so I was just wondering if you could talk about.
What remaining runway you see in your existing customer base for Promomats adoption and at any recent changes you made to that product to make it more appealing to the market. Thanks.
Promomats is going very well it is the.
Certainly the leader in this market segment.
We are happy with the uptake we still have some zinc migrations to goes I think we still have some zinc customers and that will be supported until the end of next year until the end of 2020. So there are some migrations.
In cycling, usually when that happens there's some growth in that because promomats has some capabilities that that are not there in zinc. So it tends to be expanded usage, we continues to add customers, especially in the SMB market as new customers look to commercialize.
That have that happens.
And one of the things we were I guess two things were quite excited about one is the auto claims linking so that I think is going to be a real boost for our customers. That's not a new revenue opportunity for veeva, but thats really a customer success.
Opportunity for the customers and the industry and on a related area in what we call. The commercial vault is the med comps application, we're seeing good for medical inquiries and managing medical content. So we've seen good uptake there and we've recently added quite a few features there that we can think can expand the usage. So we're really happy about how.
Promomats is doing an overall, how the zinc acquisition worked out.
It worked out very well for us and our customers.
Got it and then multiple people have referenced the Stryker engage this quarter just wondering if that's a factor of increased demand from the market or is has there been specific features that have finally come out that people have been looking for and been more receptive to it really spur that growth and double the customer account over last year.
Yeah, I'll take that one on engage so I would say, it's it's really two things. So one is this this is a different way of going to market. Its a think of an industry. That's been so focused on meeting in person and now you give them the ability to do something remotely. So there's been a lot of change management. So I think what we're seeing here is over the last couple of years, a lot of customers training and learning and figuring out how to how it works and how customers are going to respond and and what works well and what some of those best practices are and they have since learned enough to build that business case and increased the demand. So we're seeing demand from different markets across the globe, who are who want to drive the adoption of that so I think there is a learning and change management component I think thats largely that's happening and that's happening relatively quickly is just a natural part of the lifecycle of a new product like this.
And then I would say the other thing that's driving it is just the shift in our customers mindset to to get to digital faster to evolve to put in place.
The the infrastructure to support their selling models of the future all of our customers are in some respect talking about how what their future selling model is going to look like in digital is becoming a bigger and bigger piece of that and what we're trying to do is make sure that we enable a lot of that a lot of that shift in the market with a with a lot of the innovation. So in a engage is one of the products that thats driving that.
Got it thank you.
Ladies and gentlemen, we have reached the end of the allotted time for questions answered. Our final question will come from Pat Walravens with JMP Securities. Your line is open.
As Joey on for Pat Congrats on the quarter and thank you for taking my question I just going off the product questions. We are wondering about any new product initiatives you may have in the pipeline, particularly regarding fall.
Thank you.
In terms of new product initiatives.
Well it has lots of things theres, adding on to existing products. That's growing all the time you get to refine them, adding new features and functions keeping up with the regulation. So thats the boat and you're doing integrations between our suite. So that's the bulk of things going on in terms of brand new products. We're always have ideas about that and always thinking about that but.
Nothing we could announce at this time.
Thank you.
I will now turn the call back over to Peter for closing remarks.
Thank you operator, I would like to thank everyone for joining us today, and we look forward to seeing many of you at our analyst day in San Francisco on October 2nd and a special thanks to the Veeva team for your effort and teamwork and customers for their trust and support thank you.
This concludes today's conference call you may now disconnect.