Good afternoon and welcome to Veeva's Fiscal 2022 Third Quarter Earnings Conference Call for the quarter ended October 31, 2021. As a reminder, we posted prepared remarks on Veeva's Investor Relations website just after 1:00 p.m. Pacific today. We hope you've had a chance to read them before the call. Today's call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer; Paul Shawah, EVP Commercial Strategy; and Brent Bowman, our Chief Financial Officer. During the course of this call, we may make forward-looking statements regarding trends, our strategies and the anticipated performance of the business. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. Our actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q. Forward-looking statements made during the call are being made as of today, December 1, 2021 based on the facts available to us today. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. We may discuss our guidance on today’s call, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in the public form. On the call, we may also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found 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.

Thank you, Ato, and welcome to the call, everyone. It was another great quarter for Veeva with strength across the business and results above our guidance. Total revenue was up 26% to $476 million. Subscription revenue was also up 26% to $381 million. Non-GAAP operating income was $199 million or 42% of total revenue. As noted in my prepared remarks, we had a very good quarter in commercial with particular strength in core CRM, Crossix analytics, and Veeva Link. In the R&D area, we saw continued strength across the board in Veeva Development Cloud. We will now open the call up for your questions.

Your first question comes from the line of Stan Zlotsky with Morgan Stanley.

Hey, guys. Good afternoon and thank you so much for taking our questions. Maybe just starting high-level, in the quarter, what did you see as far as any shift in buying patterns? And I know you called that on the prepared remarks that I think an incremental $2 million headwind to billings in the quarter. Is there anything more to call out one-time that happened in the quarter?

Oh, hey, Stan, it's Brent. No, in the quarter we're very pleased overall with the broad base strength we saw in the business. The one anomaly that I called out was we expected about $14 million of one-time items to billings that came in at $16 million. But other than that, nothing else. I'm happy with the overall momentum and strength of the business.

Got it. Got it. And then as far as the way we should be thinking about guidance for Q4, any other shifts to note other than I think you mentioned the incremental $10 million of the essential shifts from renewables that we're going to be pushing out into Q1 versus Q4. Anything else that we need to be mindful of as far as that quarter, any kind of underlying demand trends or anything else?

Yes, so in addition to the item the $2 million you called out, so again, we're very pleased with the broad base strength. A couple of items, just to be mindful of is that the ACV booking linearity was a benefit towards the first half and the second half. If you remember, we had our strongest two booking quarters in Q4 '21 and Q1 '22. So that has an impact. In addition, the CRM attrition is starting to flow through, as we expect, and that does have an impact on revenue as well. So those are the things that be mindful of. But all in all, we've never been happier with our competitive positioning and how we look at the opportunity ahead.

Got it. Thank you so much, guys.

Your next question comes from Dylan Becker with William Blair.

Hey, guys, nice job in the quarter and appreciate you taking the questions here. I guess maybe starting with Paul on the commercial side. So nice to see some additional wins with early adopters on Data Cloud, but I wanted to maybe dig into the value with some of the releases coming up here next year with prescriber and sales data to really kind of tighten that feedback loop for these pharmaceutical companies. And I guess maybe just kind of that seems like a key driver of value here. But we'd love to kind of understand how you guys are thinking about this opportunity for those three components and data sets to really come together in Data Cloud as we think about 2022 and beyond.

Yes, thanks so much for the question. Yes, so you're right. Overall, with Data Cloud, we're really excited about the potential that we have really significant market, big market where we have patient data, which is available today in the U.S market. And as you referenced, we're going to have prescriber data in Q1 of next year and sales data in Q2 of next year. So, we're excited to expand that portfolio. When we do that, what that allows us to do is to be that sole provider for life sciences companies for the vast majority of their data. And that's where we're approaching. Today, we have patient data, which is highly differentiated, we have a number of early customers who are proving out the value proposition of Veeva's patient data in the market. They're finding more patients, they’re finding more targets. Data is more robust in many cases than what exists in the marketplace. So, our hypothesis has always been we can create a better data set and we're proving that out in the market. So, we're super excited about where we're going with Data Cloud.

Okay, great. That's helpful. And then maybe one for Peter as well. So, we've seen a lot of recent innovation across quality well, and I think you kind of highlighted it on the Analyst Day about that kind of broader opportunity set. So, I guess maybe the potential to kind of dig into that applicability here expanding again outside of potentially life sciences verticals, maybe something again that shakes out more around that kind of 2025 timeframe. But thinking of how you guys are viewing kind of the innovation cadence in quality and the long-term opportunity of that suite in itself.

Yes, quality we're very excited about is turning out to be a very broad business for us. So we added product surveillance, actually, that was a year or so ago, that's specific to MedTech, now adding validation and QC limbs for automating the quality control laboratory. So, it's pretty broad. And it has some products that are quite mature and doing well in the market, quality docs and even QMS now we've had for a long time. And then QC limbs, which is also a really big new product and we're just building that one. So, it has a combination of products that are mature and products that are just brand new. And that's targeted at life sciences, but quality is one of those products that goes outside a little bit, service providers to life sciences, its contract manufacturers, et cetera, CROs. So, lots of people need our quality suite. It can be a big business for us, that's for sure.

Great. Thank you guys for taking the question.

Your next question comes from Ken Wong with Guggenheim Securities.

Great. Thanks for taking my question. A couple of CRM questions for me. The first one, I think I found the script that you guys mentioned, maybe introducing a MedTech CRM. Is this a greenfield opportunity for you guys? Or is this just mildly additive by providing existing customers with a new experience? What's the right way to think about that particular product?

Yes, Ken, it is a new opportunity for us. Today we sell Veeva CRM for pharma into the pharma and biotech industry. And that's built on Salesforce.com, the Salesforce platform and that's going well, and none of that changes. So you can think of the pharma side as we're going to continue to execute as we have them. And what we announced differently was really for the MedTech space. So think of MedTech as this could be anything from a company that sells heavy medical equipment all the way down to surgical gloves. So, it's a broad industry, and it's a bit of a different area for Veeva in CRM. We've been selling to MedTech for the past couple of years primarily our vault, R&D applications and we're doing really well. We have over 100 customers where we sell to R&D, that's the big opportunity and MedTech is really the R&D space. But what we're doing in CRM is we're creating an industry-specific application for MedTech. We're building an industry cloud for MedTech. So, it's new and additive.

Got it. Super helpful. And then I also couldn't help, but notice that there was a mention of a top 20 enterprise customer. I guess my understanding was you guys had pretty much locked up everyone except for Roche and I recall, Matt used to say it was a bounty on that last enterprise Domino. I guess, should we think that you can vote it out? Or is this just some derivative of another enterprise customer that from a regional perspective? What's the happenings there?

Yes, this is something we take pride in. While I won't comment on specific customers, I can confirm that we have all of the top 20 customers represented globally in various key markets. We are truly proud of this achievement. These wins take time, and as noted in Peter's remarks, we have been executing very well in CRM. We experienced significant market share growth this quarter. We added the top 20 enterprise customers in the U.S. market and achieved competitive wins and expansions in Latin America and Japan. We are performing strongly in core CRM and more broadly in the commercial segment. Overall, I am very pleased with our progress.

Got it. Fantastic, guys. Thanks for taking my questions.

Your next question is from Brian Peterson with Raymond James.

Hi, gentlemen. Thanks for taking the question. So I wanted to hit on the sales rep reductions at some of your customers. I'm just curious versus where we were 90 days ago, how has that progressed? And how should we think about the impact of those reductions in fiscal year '23 versus fiscal year '22?

Yes, I could give you an update. So just as a reminder, we talked about roughly a 10% reduction happening through the end of fiscal year '24 with most of it happening by the end of next year. With regards to this quarter in particular, it was relatively light. We saw very small rep reductions, we do anticipate we'll see more in Q4, and also most of it happening through the end of next year.

Okay, got it. That's helpful. And maybe just kind of a derivative on that. It's interesting we're starting to hear about rep reductions, you could think about maybe a move to digital. And I'm curious when you're engaging with your customers on the commercial side call, like, are they talking about spending more technology and software with you. So, even though we're seeing this reduction, should we still think about spend levels overall going up? How do we kind of think about that dynamic?

Yes, they're very much related, because the reason they're able to have the productivity gains is because they're becoming more digital. So, what's happening across the industry and what happened largely over the last couple of years is that we've been driving this shift to help our customers become more digital and more productive, more efficient. And now they have those productivity gains and they get to decide how they take advantage of those gains. Either they can reach deeper into the customer base, or they can take some as reductions, and it's not a science and it takes a little while, which is why you see it playing out over time. But yes, there's certainly a correlation as they consume more of our products, as they become more digital, there are the efficiency gains, which they get the benefit of.

Thanks a lot.

Sure.

Your next question comes from Sterling Auty with J.P. Morgan.

Hi, this is Drew on for Sterling. I was wondering if you could speak to the pipeline of new add-on products, particularly within CRM or anywhere else that you're seeing add-on?

Yes, I can address that. The add-ons are continuing to perform exceptionally well. Over the past 12 to 18 months, we've seen significant spikes with certain specific add-ons. The primary add-ons are assisting our customers in transitioning to digital, and we witnessed that spike with Engage. We've transitioned much of the industry to some of the newer add-ons like Engage. However, we're seeing strong performance more generally across all add-ons because collectively, they enhance our customers' efficiency. They enable them to become more digital, improve data generation, and facilitate different operations. So, we are indeed observing strength not just in core CRM but also across the add-ons overall.

Got it. Thank you.

Your next question is from Stephanie Davis with SVB Leerink.

Hey, guys, congrats on the quarter and thanks for taking my question. I just want to call that the prepared remarks had a bunch of SMB wins. So I was hoping you could talk about traction in that end market. How should we think about the relative go-forward opportunity in SMB, just given both broader contracts and the scales IPO activity that we've been seeing lately?

Yes, the SMB space is a significant market. It hosts some of the most innovative and interesting companies, especially in biotechnology, often launching their initial medicine, whether it's highly specialized oncology or rare diseases. We can frequently begin early in the development cycle with our Vault products, typically working across various stages from clinical to regulatory and everything in between. As these companies approach launch, we often transition them into our commercial product offerings. We are currently seeing strong performance in that area. Looking ahead, I expect this strength to continue, as these customers possess the distinct advantage of starting with a clean slate. Adopting our development and commercial clouds is a clear and straightforward decision for them compared to those with legacy systems. Thus, it presents a substantial value proposition for these smaller customers, and we are making excellent progress there.

That touches on my follow-up. Are there then some products within your suite, they're much more likely to add-on or attach to earlier than some of your established relationships? And how can we think about that up in the near-term?

It varies depending on the stage of their lifecycle. Typically, in the earlier phases, they would begin with products in Development Cloud, focusing on quality and clinical aspects, then moving towards regulatory areas. As they approach commercialization, they usually start involving their medical affairs teams, which are the first to engage and position the product in the market. From there, they expand into the commercial product area. We can support them throughout this entire process.

Super helpful. Thank you.

Your next question is from Ryan MacDonald with Needham.

Thanks for taking my questions. I guess my first one is really around the Crossix wins in the omni-channel analytics. Just curious to see what sort of momentum you're seeing in that space in terms of purchase decisions. Obviously, as digital becomes a more important investment channel with those rep reductions physically. Thanks.

Yes, you're right, and that's contributing significantly to our momentum. Crossix is truly the best product available in the market. We have been developing and refining this product for a long time, and it is performing well. We plan to maintain this positive trajectory. Additionally, we are introducing innovations in the Crossix area. For example, we have incorporated interesting data from CRM into Crossix, which our customers find valuable. They seek that level of innovation from us. The demand is growing as our customers engage more in digital initiatives, which creates a greater need to measure and evaluate effectiveness. That’s why they rely on Crossix. We're enthusiastic about this and believe it will continue to be a significant contributor and grower for us in the coming years.

Great. And then maybe as a follow-up, I thought it was interesting in the prepared remarks around Data Cloud and sort of the discovery of new use cases or new types of data within your customers thus far. Just be curious to hear some examples of some of those new use cases. Thanks.

We began with longitudinal patient data, which is currently available in the marketplace, and we are in the process of expanding to additional datasets. Our customers find the patient data extremely valuable, especially in the context of newer, specialized precision medicines. It provides them with crucial insights into the patient's journey, including diagnosis and indicators that might suggest effective long-term treatments. This data is instrumental in identifying patient locations, understanding their treatment paths, and when to transition them to different medications. Additionally, it aids in customer segmentation and targeting. These specific use cases are already benefiting our early customers, who are experiencing positive results.

Great. Thanks for the color.

Sure.

Your next question comes from Brent Bracelin with Piper Sandler.

Hi all. This is Hannah Rudoff on for Brent today. Thanks for taking my questions. First one is kind of a follow-up on the last question. I think in the past, you've talked about customers maybe being able to find around 10% more targets using your patient data than using a legacy competitor data. I guess where do you see that number going once you have all three data sets rolled out?

Yes, that's a good question. It will depend on certainly the therapeutic area and where we're competing, who we're competing with, where you're comparing it to, we do believe, because we're taking a modern approach, we're using technology, we're able to find the data that others are not able to find, and we're able to match those datasets together and create something really robust. So that's why we've been able to find additional patients, additional health care professionals and targets because of that. Do I see it? It may range, right? It's going to range. In some cases, it may be higher, it may be not as much. But we're pleased that the customers are getting the value that we thought they would get out of Data Cloud and it's only going to go in the right direction as we continue to invest more heavily in data.

Great. And then how are you thinking about headcount going into next year?

Yes, I'll take that. So, we're pleased with our journey towards 10,000 employees in 2025. We have very aggressive targets, and we're focused on building the organization to drive customer success and innovation. So, we're leaning in to investing in our people.

Thank you.

Your next question comes from Brad Sills with Bank of America.

Oh, great. Thanks, guys for taking the question here. Congratulations on a nice quarter. I wanted to ask about any deals this quarter in that top 50 segment for clinical CTMS, CDMS? How did that fare during the quarter? Thank you.

We are pleased with the progress in our clinical operations. Our Clinical Data Management System (CDMS) continues to attract new customers as they increase the number of trials. We are also expanding our oncology trials, which tend to be more complex and require greater adaptability, making CDMS an appealing option for our clients. Each quarter, we are adding more trials and advancing in our enterprise initiatives. Additionally, our established products like ETMF are performing well, and our customers are exploring opportunities in areas like Clinical Trial Management Systems (CTMS). We are proud of our achievements in the clinical sector, and our customers are confident in our vision for digital trials and the foundational role clinical processes play in that vision.

Great to hear. And then also, if I may, just an update on the regulatory business that has been launched earliest and seen a lot of traction over the years. How well penetrated is that installed base? In other words, what's the runway to cross-sell and upsell that into the base from here?

Yes, you're correct. It was one of the earlier offerings, and there is still significant potential in regulatory. Additionally, consider that regulatory consists of a suite of products, similar to other areas. We offer submissions, along with the capability to archive and publish those submissions and registrations. This includes several products, and we are observing two key trends. One trend is that customers who initially adopted submissions and registrations are now expanding into publishing. We are seeing growth from existing customers acquiring additional applications. Furthermore, as noted in Peter's comments, we have our first enterprise client fully committing to the regulatory suite. These two trends are developing, and there is certainly plenty of potential ahead.

Great to hear. Thanks, Paul.

And Brad, I would say a little more color in the second half of this year, end of Q2 and Q3 here. And frankly, the start of Q4, we've seen a lot of good momentum in the clinical data management. I think that's been, as I reflect a real bright spot. Now, particularly with large enterprises that doesn't turn into orders or close deals right away, because that's a risk-averse area has a long runway, but that's a real bright spot, our progress in CDMS in this so far, this calendar year.

Excellent. Thanks, Peter.

There are no further questions at this time. I'll now hand it over to the management for the closing remarks.

All right. Thank you, everyone for joining today's call. I'd like to thank our customers for their continued partnership and the Veeva team for their commitment to customer success. Thank you.

This concludes today's conference call. You may now disconnect.