Veeva Systems Inc (VEEV) Q2 2024 Earnings Call Transcript

Good afternoon, and welcome to Veeva's Fiscal 2024 Second Quarter Earnings Conference Call for the Quarter Ended July 31, 2023. As a reminder, we posted prepared remarks on Veeva's Investor Relations website just after 1:00 p.m. Pacific today. We hope you have 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 call, we may make forward-looking statements regarding trends, our strategies and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. Our actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q. Forward-looking statements made during the call are being made as of today, August 30, 2023 based on the facts available to us today. If this call is replayed or reviewed 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 a public forum. On the call, we may also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found 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, Gunnar, and welcome, everyone, to the call. We had another strong quarter, delivering results ahead of guidance, including total revenue of $590 million and non-GAAP operating income of $212 million. In commercial, I'm excited about our first Vault CRM customer win and planned general availability date in April 2024. That's really strong progress by the Veeva team as we deliver the next generation of CRM. We also saw great activity in clinical, both with our established products and our newer products in clinical operations and clinical data management. At this point, we'll open up the call to your questions.

Thank you. Your first question comes from the line of Joe Vruwink with Baird. Your line is open.

Hi, everyone. I wanted to begin by discussing the announcement this week about Vault CRM acquiring its first new customer. The planned go-live later this year seems to be ahead of the previous timeline we had mentioned, which was 2024, possibly around the Summit next year. If I'm correct in thinking that this is a quicker schedule, can you share any insights on why that might be? Additionally, does this impact your thoughts on the launch and strategic progression moving forward?

Hey, Joe. This is Paul. Thanks for the question. We're very excited to announce our first customer win. This is an early adopter, and the plan is for them to go live in the fourth quarter of this year, which is a bit earlier than we had anticipated. Vault CRM is making great progress, and our product team has delivered excellently over the past year since we announced it. We're pleased with the advancements and confident about our direction. As for the timing, it aligns with what we previously discussed. We plan to consider new customers starting in April next year, which is what we mean by general availability. Our first migration will begin in 2025, and we expect to migrate most of our customers between 2026 and 2028. So, fundamentally, not much is changing, and yes, it is a positive sign of our progress.

Okay, that's great. And then, just pertaining to the strength in EDC with the wins this quarter, and then really the highlighting of the broader clinical data management strategy in the prepared remarks. When you step back and look at all of this, would you say really no different than what Veeva has now done several times over its history in terms of product leadership, lighthouse account wins, and then building out the suite? Or just given the size and consequence of this category, would you maybe start highlighting different things in terms of strategy, the consequences going forward about your clinical data, specifically?

I'll take that one regarding the broader clinical landscape, which includes clinical operations and clinical data management. They are closely related. Here are a few high-level thoughts. When we initiate a new product area, we always have plans and do our best. Sometimes we meet our internal goals, and other times we do not. In the clinical area, we likely exceeded our expectations so far. Our initial steps in clinical with eTMF began in 2012 and CTMS in 2016. We're ahead of schedule. While all product areas hold significance, clinical is particularly crucial. In summary, we are very pleased with our progress and execution. We've also benefited from some good fortune, and now we need to focus on our customer success to continue thriving.

Great. Thank you very much.

Your next question comes from the line of Ken Wong with Oppenheimer & Company. Your line is open.

Great. Fantastic. This first question for Brent. Just wanted to understand the moving pieces on the billing side. Exceptionally strong in Q2, held the line for the full year. Just wondering if maybe some pull forward, some realignments. Like, what drove those moving pieces?

Hi, Ken. I’ll take that one. From a full year perspective, we reaffirmed our full year billings guidance, growing at about 15%. As we've mentioned before, looking at any single quarter can show some fluctuations. In Q2, we were pleased to experience some benefits from the timing of certain deals, which closed earlier than expected. While these deals were anticipated to close within the year, their closure in Q2 won’t affect our overall full year results. We prefer to have the business sooner rather than later. Overall, we are satisfied with our execution.

Got it. Makes a ton of sense. And then for Peter, just you guys touched on SMB softness. I think that's something you called out a year ago, but it did sound like it was more towards the commercial side when you first called it out. Would you say you've seen any impact or more meaningful impact on clinical, or is it held roughly the same in terms of how that SMB exposure has weighed on the business?

We always expected that the macro environment would impact commercial and small and medium-sized businesses, especially smaller SMBs in the emerging biotech sector. When funding is low, these companies may struggle to finance their clinical trials and growth. Overall, things are unfolding as we anticipated. I'm not sure when there might be a shift, if at all, but that uncertainty will remain until it happens. For now, our business performance aligns with our expectations.

Got it. Okay. Thanks for the color.

Your next question comes from the line of Rishi Jaluria with RBC Capital Markets. Your line is open.

Hey, thanks for taking my question. This is Richard Poland on for Rishi. So, just one for me. On the China exposure that you called out in some of the prepared remarks, and you said that you kind of factored that into guidance. Just wanted to get a little bit of clarification on what exactly is factored into guidance on that side.

Yeah, this is Paul. I can provide some context regarding the situation in China. There have been some regulations introduced over the last couple of years that affect data transfer outside of China, which has implications for Veeva CRM. Veeva CRM is the leading CRM used by most multinationals operating in the Chinese market, and these regulations are prompting companies to reconsider their solutions. We have a product tailored for the Chinese market, which is our China SFA product. Concerning the scale and impact of this, it's not substantial. We've taken this into account, and it does not represent a significant challenge, either this year or next year. That's a way to think about it.

All right. Thank you.

Your next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Hi, gentlemen. Congrats on the strong quarter. So, I wanted to double click on the Vault CRM. It was good to see the win this quarter. I'm curious, you did announce some other wins this quarter. As we progress towards GA, should we expect to hear more of the kind of net new CRM wins be Vault, or would they still kind of go with the Salesforce CRM? Any way to kind of level set expectations there?

That's a great question. It will depend on the customer specifics. We will carefully consider and collaborate closely with our customers. We're transparent about our strategic direction. For some companies, Veeva CRM is the appropriate solution, and we will offer that to them and work together. As we approach the April date, it's reasonable to evaluate this, and certainly after April, we will shift more towards Vault CRM, ultimately transitioning to exclusively Vault CRM for new customers.

Great. Thank you.

Your next question comes from the line of Dylan Becker with William Blair. Your line is open.

Hey, gentlemen. I appreciate you taking the question here. Maybe for Peter too, you emphasized the multi-product kind of strategy effort. It seems like as you guys are going wider, you're also going deeper functionally. I think you called out a number of new solutions that have the potential to be larger markets than kind of what some of your respective offerings currently have. I guess, how do you think about that in context to the durability of the growth equation and what Veeva can look like over time as you go deeper from a functional perspective?

Thanks, Dylan. Yeah, it's really good way you said it. One of our special things is this multi-product company approach, our operating model that allows us to do that. So, excellence in an area like clinical or quality or safety, but because we have a lot of autonomy in those areas, we can go deep in those areas and provide the full suite of things, not just the surface level. So, if we look actually in clinical, there's not been a company that has attempted to do the full broad suite of clinical applications such as Veeva is trying. Nobody has attempted that before, let alone succeeded at it. So, it is absolutely our strategy to go in each area with autonomy, deep in each area with excellent applications, the main ones that people need, and then have things aligned across areas on a common set of values, how we operate as a company, how we strive for product excellence, how we do controls, and so that we see if we have some customer success issues and catch that. One of the reasons why we're durable is we're optimizing for the whole, and customers appreciate that. They know when we sell them, let's say, our RTSM solution, we care deeply about that success, not only for the reputation of our RTSM business, but for the reputation of the overall Veeva, which is much more than the RTSM business. So, in other words, we have more to lose if we have an unhappy customer in an area. So, we will work harder to protect that, which is what the customers want. And that's the beauty of our operating model.

Got it. That's very helpful. I also want to mention the upcoming R&D Summit in a few weeks that will support our maturing product offerings with 2,000 attendees. Could you, either Peter or Paul, elaborate on the significance of this event as you enhance customer and product excellence, not only for the existing platform but also for the newer initiatives you are pursuing? Thank you.

Yeah. Customer summit in Boston for R&D in U.S. coming up here in a couple of weeks. And we'll have about 2,000 people. It's absolutely one of our key reference selling events. Now reference selling goes on all the time across the globe every day, people talking to other people. 'Hey, what about those Veeva products? What do you think about that? Are you having a good experience? Not a good experience? I'm thinking about using it. What do you think?' That's reference selling. But it happens really in a hurry in the customer summit, because there's 2,000 people and they're there. Their time is focused, and they have fortuitous run-ins with each other in the hallways, unplanned pollination, that's a little bit difficult to get without a physical event. And I think, you saw that, not just with Veeva, but with other companies. During the COVID crisis, there was initially a massive spread of information, everybody getting on zoom. But then after a while, you noticed the information didn't spread as much because there weren't these spontaneous interactions happening. So, you're right to say it's our massive cross-selling event.

Great. Thank you, guys. Appreciate it.

Your next question comes from the line of Ryan MacDonald with Needham & Company. Your line is open.

Hi, thanks for taking my questions, and congrats on a nice quarter. Peter, maybe first for you. Great to see the continued success with Compass patient and starting to get more wins there. Can you just talk about how you're sort of driving that success in an environment that seems to be quite tough in terms of data investment right now given the tight budgets?

I'm very excited about Compass. There are many companies looking to purchase various data products, often acquiring from multiple sources. While those wins are likely to occur, they don't thrill me as they're relatively easy to achieve. What truly excites me is our product vision and the efforts from our product team, along with the ambitious goals we've set. We're striving to offer a unique, highly-integrated suite of data products, including Compass, Link, and OpenData, aiming to become the leader in life sciences data. No one else has attempted this in the last two decades, as IQVIA has been the indisputed leader in this field. We have a well-structured product team that's creating a clean, innovative approach, much like the transition from client-server to cloud computing, fundamentally improving the experience. The key is garnering enthusiasm from early customers and understanding the reasons behind their feedback. The initial signs suggest that, with strong execution, we could achieve something significant.

Maybe just a quick follow-up on that. I mean, from the customers you've won so far, do you get the sense that they're sort of committed and bought into the broader product strategy with the additional datasets coming out where you can start to have, take that multi-product adoption to sort of consolidate more on Veeva? Thanks.

I wouldn't say that the customer is fully committed yet, but they do recognize the potential. This could be very good and distinct. There's room for growth, and I should pay attention to it. However, no one has made a commitment because we haven't launched our major products, which are Compass Prescriber and Compass National. We need to roll those out, and customers have to start using them consistently and with quality month after month. That's what truly generates excitement.

Your next question comes from the line of Tyler Radke with Citi. Your line is open.

Yeah, thanks for taking the question. So, if I look at the full year guidance, obviously a lot of the metrics stayed pretty unchanged. It did look like you slightly took up the commercial guidance. But in the quarter, it seemed like R&D, at least, outperformed consensus. So, I know it's not big changes, but could you just talk to the modest changes you're expecting for the full year outlook? And I guess to the extent macro is impacting the business, are you seeing it more in R&D versus commercial? Thank you.

We have increased our full year subscription guidance by about $5 million, primarily driven by the commercial sector. In this area, we experienced favorable timing with some deals closing earlier than expected. This is reflected in our full year projections. Research and development performed exactly as anticipated, with our execution on track and deal timing aligning with our expectations. Overall, from a subscription standpoint, things are progressing as planned. Regarding the macroeconomic environment, there have been no surprises. At the beginning of the year, we indicated that conditions would remain stable, and we have observed this in the first half, expecting the same in the second half as well.

Got it. And maybe another follow-up for you, Brent. As I think about the billings guidance and your expectations for normalized billings versus calculated billings, I think last quarter, you were expecting more of a headwind on the normalized billings about an $8 million headwind. This quarter, it seemed like it maybe turned out to be a tailwind, if I'm reading those signs correctly. Could you just talk through kind of what you saw in the quarter from a normalized billings perspective that differed relative to your original guidance, and I guess if there's any changes for the full year? Thank you.

From a normalized billings perspective, we focus on our renewal business by adjusting for changes in billing frequency, such as when a customer switches from annual to quarterly plans or vice versa, as well as for co-terms. This approach helps us eliminate variability in the data. While there may always be fluctuations due to co-terms or billing term changes, these do not affect the normalized figures. Therefore, I wouldn't read too much into the $8 million or $3 million variations. It’s more important to consider the full year, where we are projecting a 15% growth and are confident in this outlook.

Great. Thank you.

Sure.

Your next question comes from the line of Brent Bracelin with Piper Sandler. Your line is open.

Thank you. Good afternoon. Maybe first for Peter. I wanted to double click into the clinical data management space. I mean you talked about some pretty strong momentum with ePRO and RTSM. I think you framed that as an opportunity bigger than EDC. What are the catalysts that you think can drive broader adoption of ePRO and RTSM? Are we in an environment where this is still largely a push, or are we starting to see kind of customer pull?

Good questions. Regarding RTSM and ePRO, I believe life sciences will exercise caution in these areas. Proper management of randomization and trial supply is crucial; any mistakes could jeopardize patient safety and significantly impact the investment in the trial as a whole. Therefore, companies will likely proceed with some initial trials to gauge their effectiveness, which is a wise approach. In the ePRO segment, which involves patient-reported outcomes, they will also be particularly careful. I anticipate that initially, people will experiment with one trial at a time, and if they are satisfied, they may expand their adoption. Over the coming years, we might see a trend toward establishing an enterprise standard for randomization and trial supply management, something that hasn’t been done before due to market dynamics. Typically, selections have been made on a trial-by-trial basis with various vendors, much like using a contract research organization. With our innovative approach, a company may decide to work exclusively with Veeva for all its randomization and trial supply management needs. Similarly, the ePRO landscape may evolve to a point where companies no longer select the best ePRO on a trial-by-trial basis. Our goal over time is to earn the opportunity for an enterprise agreement in the ePRO space. Additionally, we support the concept of bringing your own device, allowing patients to use their own web browsers or smartphones rather than relying on bespoke applications provided by pharmaceutical companies. We have made significant advancements to facilitate this, which was not feasible a decade ago when ePRO was first introduced. We are adopting a new strategy that we believe is superior, but it will take time for the system and stakeholders to adapt to this approach. We anticipate innovative outcomes from our efforts.

Got it. Very clear. And if you become the standard, obviously, a lot to gain there. My last question for Brent here. If I just look at net cash, it's on pace to eclipse $4 billion for the first time in the second half of the year. You're now looking at generating $1 billion in cash flow annually here. What are the plans for that excess cash position? Is there an opportunity to maybe accelerate your product plan that's ambitious with more tuck-ins? How do you think about that $4 billion in the second half, going to $5 billion end of next year, and what the appropriate uses for that cash would be?

Yes, sure. So, Brent, yes, you're right, we run a profitable business, and we're generating a good amount of cash, and we're at about $3.9 billion. But we're focused on M&A. M&A is a use of cash. If we see the right acquisition, that's what we're going to do. But as always, in Veeva fashion, we're going to be disciplined about it in our strategy, in our approach. And we have done a few deals in the past, and we've been successful in those deals. So that's really our focus, Brent, right now is to really invest for growth and M&A is a big part of that.

Thank you.

Your next question comes from the line of Jack Wallace with Guggenheim Securities. Your line is open.

Thanks for taking my questions. Brent, my first question is about your billings guide. It seems like there's a shift towards more subscription billings compared to services, and the implication from the services guide suggests a lower projection within the previous range. If that's correct, is this related to some larger deals you've signed this year or expect to sign later that might require fewer Veeva resources during implementation?

Yes, there are several factors to consider. If we take a broader look at the services area, there was a slight decline, which will have a minor effect on billings. However, in Q2, we experienced some positive developments. Our visibility into the business remains unchanged; we simply closed some deals a bit earlier, alleviating some pressure on our growth rate for that period. We are very pleased with the visibility we have and the growth rates we are observing in that business, which stands at 15%.

Excellent, thanks. And then Peter and Paul, your question about the kind of competitive landscape in commercial. What have we seen since last quarter in terms of activity from Salesforce and essentially even IQVIA in and around the public migration taking place?

Yes, I can address that. With Salesforce, it's essentially business as usual. They've been a reliable partner, providing support to our current customers, and I anticipate they will continue to do so throughout our agreement. Regarding their position in the competitive landscape, I cannot comment on their future direction or strategies. However, it is quite challenging to create a pharma CRM, as it requires a deep understanding of life sciences and is quite complex, differing across various regions such as Brazil, Japan, and Italy. This makes it quite distinct from what Salesforce typically handles. Additionally, we have the full commercial cloud, which includes CRM, software, and data working together seamlessly, a feature that competitors lack. From my viewpoint, this market does not seem attractive for Salesforce. As for IQVIA, there have been no significant changes; we continue to win the majority of deals. In the past quarter, we secured eight SMBs. Looking ahead, it's important to note that Veeva CRM and its add-ons account for about 25% of our total revenue, and we plan to transition the majority of that to Vault CRM over the next five years. This gives context to our approach: while the competitive landscape may evolve, we aim to migrate most functions and concentrate on our next-generation CRM.

Got it. That's helpful. Thanks. And then just a quick last one here. What should we be anticipating in terms of the migration costs maybe on the back end side versus also the implementation side?

I'm sorry, can you repeat your question about the migration path? I just want to ensure I understand.

The cost for migrating customers, just incremental to the existing expense base.

Yes, the costs associated with migration will vary based on several factors. A significant factor will be the approach customers choose, ranging from a straightforward lift and shift to more optimized business processes. We are developing many tools to streamline this migration process. I estimate that moving to Vault CRM could account for about 20% of the total expenses involved in launching something new or building a new offering. This positions us advantageously because our customers will receive everything delivered in Veeva CRM on day one, in addition to more features. This approach is not only more efficient but also improves the overall application experience we provide.

Thank you so much. Appreciate it.

Your next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open.

Yes, thank you. In R&D, can you touch on the ramping nature of some of the larger wins in EDC? And how do you think about that in terms of layering on to the growth rate?

Brent, do you want to take that one?

I'm happy to take that one. When we look at these large EDC deals, they are not just for one year. Instead, they are multi-year agreements that can last three to five years. In the first year, the revenue won't be significant. However, as we move into the third, fourth, and fifth years, it will become much more substantial. Revenue will align with the billing path as we look ahead. That's an important perspective to keep in mind.

Okay. And then just switching gears back to some of the questions on the data business in commercial. Can you touch on just how you're thinking about just from a timeline perspective when you could see some inflection in that business?

I can address that. I believe the real shift will come from customer success and product quality, and I think we will have a clearer understanding about a year from now. This will significantly impact our financial results, but it will take time. Compass will not reach $60 million or even $50 million in revenue anytime soon over the next few years. The timeline for these developments is lengthy. The key indicator will be customer success, particularly with smaller biotech companies that currently rely solely on Veeva data products and report satisfaction without using any IQVIA data products. That's when we will know we have something valuable. These are the factors we are focusing on every day, making adjustments to aim for progress in the coming year.

Got it. Thank you.

Your next question comes from the line of Jailendra Singh with Truist Securities. Your line is open.

Thank you, and congrats on a strong quarter. First, I want to better understand the margin trends in the quarter, which came in nicely ahead of your quarterly guidance when you adjust for TFC and FX impact. Just trying to understand what drove the upside there? And it looks like you're only raising the EBIT guide for the full year to reflect outperformance in the quarter. So, how are you thinking about those cost trends in the second half?

Yes, thank you. So, we're really happy with the performance in Q2. And you're right, we did flow through that outperformance in op income about $10 million to the full year. So, we increased our full year number by 10%. So, growing at 38% in the quarter, and that's really about just great focused execution across everyone at Veeva, all functions. So really good execution. And so, we're real pleased with that. And if you look at our full year guide, we're guiding to about 37%. Remember, there's a little bit of seasonality in Q4. But other than that, it's just purely about execution, and we're going to continue to focus on investing in areas that make sense that can accelerate our value to our customers.

Okay. And then following up on the question on macro front, asked earlier with respect to the funding environment, putting pressure on smaller biotech companies. I understand your fiscal '24 guidance does not assume any change there. But what are you assuming in your fiscal '25 outlook? Are you assuming any improvement in trends there? And then my broader question on macro is that I completely understand that Veeva products are core to pharma R&D, but some of your peers and competitors have been talking about shrinking R&D budgets for pharma and cut down on discretionary spending. What gives you comfort that these trends will not start spilling over to your focus area? Just trying to understand the comfort there.

Yes. Let me take the first one. So in our guidance, we've assumed that the macro environment will continue. So, we don't expect it to get better nor do we expect it to get worse. Fiscal year '25 is long ways out, but that's our base assumption as you think about our guide.

The life sciences industry is performing well. There will always be fluctuations in clinical trial activity from quarter to quarter. However, looking ahead over the next couple of years, we are anticipating an average growth of about 3% in R&D budgets. While there will be some ups and downs, I don't foresee any significant impact on our business, as this area represents a smaller segment for us and we are mainly focused on our ELA initiatives.

Thank you.

Your next question comes from the line of Stan Berenshteyn with Wells Fargo Securities. Your line is open.

Hi, thanks for taking my questions. In the prepared remarks, you called out Veeva Link as contributing to commercial subscription growth in the quarter. Brent, could you maybe give us an update on the ARR under Link? And then, Peter or Paul, can you share with us what are some of the newer products under Link? Thanks.

I won't provide specific ARR figures, but it's important to note that Link presents a significant opportunity for us. We're performing well, and our first application, Link for Key People, is gaining strong traction, which is contributing to our revenue growth. This has been a key factor in our commercial revenue growth in Q2 and will continue to be for the rest of the year.

This is Peter. I apologize for the audio issues. I want to discuss Link overall. We initially developed Link for Key People, and while doing that, we were also constructing the Link platform to expand into various solution areas, which you started to see last year. This includes Link for Key Accounts, for Multiple Countries, Link for Scientific Awareness, for Medical Insights, and Link Workflow. We have also introduced Link TrialBase and Link SiteBase in the clinical area. We've announced a comprehensive range of products. Each of these products will take time to mature, as Brent mentioned. Currently, over 90% of our Link revenue comes from the Link for Key People. We believe it has the potential to offer a wide array of solutions that can provide significant value, but we will have to evaluate if we can create exceptional applications and satisfy our customers. We are quite advanced with Link for Key People, and there are many more customers to reach. The product is very mature and is the market leader. We need to see if we can achieve similar success with our other Link products.

Got it. And then maybe just a quick one on Crossix. Obviously, that's a choppier business quarter-to-quarter, but can you share with us any trends you're seeing as it relates to pharma marketing activities and demand? Thanks.

There are no significant new trends in marketing that we haven't observed before, just a heightened level of scrutiny. Marketing is an expenditure, and this scrutiny has intensified compared to a couple of years ago. However, it continues to perform well for us at Crossix and will have fluctuations from quarter to quarter. Companies are looking to reach their customers in the U.S. primarily through face-to-face interactions and digital channels, utilizing both methods, with digital marketing playing a crucial role. Crossix stands out as the leading measurement solution, indicating a strong long-term business prospect. Our strategy is to integrate Crossix more closely with CRM, moving towards enterprise license agreements while reducing its identity as a standalone measurement tool.

Great. Thanks so much.

Your next question comes from the line of Saket Kalia with Barclays. Your line is open.

Okay. Great. Hey, guys. Thanks for taking my questions here. Apologies in advance if these questions have been asked, but I'm going to try it anyway. Peter, maybe first for you. Great to see the growth in the EDC customer base. I think we said we added eight, right, in the quarter. Maybe the question for you is, are there any commonalities that you're seeing across some of those wins? Whether it's coming from one or two specific competitors or maybe a common reasoning that you're seeing those customers choose to switch Any observations that that you would make just as you look at a bigger EDC customer base now?

There are some common themes. Most of our new customers are either switching from Medidata, which is the industry leader by volume, or from several smaller competitors that focus on the SMB market. Regarding Medidata, customers often compare it to Veeva's EDC solutions, but they appreciate the integration with our clinical operations suite. In instances where they prefer our solution, it often comes down to specific details. For example, with study amendments, competitors may require unloading and reloading data, which disrupts clinical research sites. With Veeva, our newer architecture avoids these issues. Additionally, our customers can create and define their studies much faster, potentially reducing the time from eight weeks to four. The Veeva system demands less custom programming compared to other solutions, which can be costly and require specialized skills. Thus, our users can simply define their needs without extensive customization. As for why customers might choose Veeva over smaller SMB solutions, it's usually because they want a suite of integrated solutions from a single provider. We offer a strong clinical trial management system alongside our EDC system. Using both systems together enhances functionality, although they can also work independently without requiring integration. The same goes for our ePRO and RTSM systems; they function well on their own but are even better when used with our EDC. Ultimately, customers are looking for a reliable clinical partner with outstanding applications, which is what they find in Veeva.

Got it. That makes a lot of sense. Brent, maybe for my follow-up for you, and, again, apologies if this has already been asked. But some competitors during the quarter talked about maybe some lower clinical trial volume just kind of industry wide, and that potentially impacting their revenue. Maybe just to level set for all of us, can you just remind us how much of Veeva's business, if any at all, is dependent on sort of near-term in-quarter clinical trial volume that we could sort of get a sense for Veeva's exposure to that potential trend?

Hi, Saket. So, a very small amount is going to be variable based on near-term trial volumes. If you consider our six top 20 EDC wins, those are typically multi-year predefined ramping deals. Therefore, they won't fluctuate with the short-term changes in trial volume. I would say that has a minimal impact on how we approach the market and contract with our customers.

Very helpful. Thanks, guys.

Your next question comes from the line of Brad Sills with Bank of America Securities. Your line is open.

Hey, this is Carly on behalf of Brad. We discussed the fiscal year guidance, particularly the implied guidance for Q3, assuming the current macroeconomic conditions persist. I’d like to explore this further regarding specific cohorts or products. I understand that smaller biotech customers are affecting the R&D business. Going forward, looking at the second half of the year, which segments do you anticipate will be more impacted than others, and are there any that might recover sooner to help offset the weaker macro conditions? I'm interested in delving into the nuances here.

Yes. So, starting from the top, the macro, again, we expect it to be a continuation of what we saw in the first half and the back half. If you look at our full year guide and you look at R&D, we're growing that business at about 28% adjusted for termination for convenience. So that's a very healthy business, growing nicely, and we continue to execute, and we see the strength to be broad-based across clinical, quality, and safety in the rest of the businesses in regulatory. So broad-based strength there. The macro was going to impact both commercial and R&D, but nothing more than what we've been seeing. So, we're happy with the execution we have broadly across the portfolio.

Got it. And then just a follow-up for me, if I may. You definitely have broad solutions stack, 35 products. Just looking beyond the macro here, perhaps fiscal year '25, you reiterate $2.8 billion target. So just wondering, in your broad product suite, are there any ramping more meaningfully in the pipeline that might contribute more to the growth going forward?

Yes. So, we reiterated the $2.8 billion. We're not going to get into specific splits of the product portfolio. But as Peter has indicated in his prepared remarks, we're less than 20% penetrated broadly and across R&D. So the beauty of being a multi-product company and have 35-plus major products is you have broad-based strength, and that's what we're seeing. We see a broad opportunity and it's up to us to execute to that.

Got it. Okay, thank you.

Your next question comes from the line of Charles Rhyee with TD Cowen. Your line is open.

Hi. This is Lucas on for Charles. Most of our questions have been asked. So, I guess a longer-term question around Vault CRM. As we understand it, bringing the CRM product on to your own platform, give you guys the ability to develop some add-ons or added functionality that your customers may be currently going to other vendors for. So two questions, I guess. Would like to hear what sort of functionality this may entail, maybe that's asking too far down the roadmap, but would be curious to hear how you guys are thinking about this opportunity. And then two, is the timeline for when you guys may look to add such functionality?

Yes. Hey, Lucas, this is Paul. The primary reason for this decision was to have complete control over the platform and the application, which ensures we can achieve customer success. Our goal is to provide the best application and customer experience possible. This overarching decision allows us to potentially unlock new functionality, some of which we have already announced. While I'm not going to reveal any new announcements for the future, one exciting feature that has been well received by our customers is our focus on making the industry more service-centric. This will support the introduction of new therapies and complex medicines, allowing doctors to receive important information from life sciences. This is just one example of what we can do. I expect that, as part of our operating model, we will continue to innovate and introduce new features in Vault CRM over time.

Okay. Appreciate it. That was it. Thank you.

There are no further questions at this time. I will turn the call back to Peter for closing remarks.

Thank you, everyone, for joining the call today, and thank you to our customers for your continued partnership and to the Veeva team for your outstanding work in the quarter. Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect your lines.