Veeva Systems Inc (VEEV) Q2 2027 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to the Viva Systems Fiscal 2027 Second Quarter Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Gunnar Hansen, Senior Director, Investor Relations. Gunnar, please go ahead.

Good afternoon and welcome to Viva's fiscal 2027 second quarter earnings conference call for the quarter end of July 31st, 2026. As a reminder, we posted prepared remarks on Viva's Investor Relations website just after 1 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 Shalva, EVP Strategy, and Brian Van Wagner, our Chief Financial Officer. During this call, we may make forward-looking statements regarding trends or strategies and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be used 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 risk listed in our earnings release and the risk factors included in our most recent filing on form 10q forward-looking statements made during the call are being made as of today august 26 2026 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 even disclaims any obligation to update or revise any forward-looking statements We may discuss 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 presentations, 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. Q2 was another strong quarter delivering the results ahead of our guides. Total revenue in the quarter was $928 million with non-GAAP operating income of $416 million. Execution was exceptional this quarter as we made strong progress in many key areas. It was our best CRM quarter ever. We also are accelerating rapidly in AI overall, and especially with Viva Falcon. And our focused acquisition strategy is working, bringing great people and capabilities to Viva. It's an exciting time. AI is enabling the next big chapter for Viva and the industry. We'll now open up the call to your questions.

You will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand to withdraw your question press star one again we ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally please remember to unmute your device please stand by while we compile the q a roster your first question comes from the line of joe vrewink with baird joe your line is now open great thank you for the time today.

I think it's evident over the past few months that biopharma R&D spending is headed in a positive direction and that also is showing up at Viva. As pipelines move forward, what are you finding the mentality to be at customers around assessing and adopting something that's brand new with thinking about the Vault application agents or even Viva Falcon? I'm interested in levels of early interest taking place amidst what seems like a busier environment, and whether that's a reflection of the value customers are seeing pretty quickly when they start looking at the new Viva offerings.

I'll take that one. Yeah, there are a lot of things going on, right? The funding environment is relatively good. There's a lot of changes with AI, and science is moving ahead. So there's a lot of priorities for the customers. And so when that happens, they can't do all things at once, and they generally try to pick some things that they can do and that are high priority. Your question was related to Falcon. I think Falcon has a lot of interest right now because it's very clear that that's high priority. Quick cost savings and compliance and efficiency, you know, that's high on everybody's priority. So I think there's a lot of interest in Falcon. We're the rate limiter right now. We have to get that product ready, start working with the early adopters, but interest in Falcon is very high.

That's great. And then maybe as you think about how customers can now engage with Viva in an AI framework, you have the application agents, you have Falcon, you have a custom development framework that you've introduced. are any of those modes of engagement maybe becoming larger or a bigger piece of the conversation and do any of those modes matter more or less as you think about how your financial model evolves and what the impact might end up being to viva um yes it is a major change for for viva so falcon is a gentic labor that's something different than we've done before

We've done cloud software, data consulting, now we have this fourth thing, agentic labor. So it is transforming the discussion. There's two different things you could do with Viva. You can do some agentic labor, you can do core applications. That was never the case before. The important point is Viva, it fits very well. It's a structural advantage for Viva to both have the agentic labor across multiple areas in life sciences and have the core applications across multiple of those areas in life sciences so that's why i feel like we're we're very well positioned um and the conversations are very rich gosh i just hope you know we got to get that product going as soon as we can if we had our early adopters live and successful right now i don't want to be hyperbole but falcon would be flying off the shelf if that was the case because one thing to know is there's not an extensive falcon implementation there's not a data mapping from one system to the other there's not a cutover process there's not etl to do to do so this implementation the full value is is faster with falcon but you know the tech underneath it is newer and we have to get our motion down there If you can tell, I hope you can tell. I'm pretty excited about Salka, and I really think we're on to something.

That's great.

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

Gentlemen, thanks for taking the questions, and congrats on a strong quarter. So the commercial segment was really strong this quarter. I know you called out a record result. Could you maybe unpack what drove that acceleration in the subscription line item? We'd love to get some more color there.

This is Brian. I'll take that one. Commercial subs, yeah, very strong quarter. I think the culmination of many quarters of execution, but you see them showing up in the results here, up about 13% year over year. Even when we back out cross six, it's double digits in the rest of commercial. So it's quite a broad-based strength in the commercial offering across CRM, content, data, CrossX, Ostro most recently. So we feel very good about the execution. CrossX continues to be a strong performer with a lot of headroom for growth. We're continuing to see growth in CRM, which I think a lot of the conversation has been is that going to go down. It's actually going up. And we're continuing to see a lot of room to continue growing in a healthy market in CrossX as well as the other areas.

Great. I appreciate the caller. I just want to follow up on Aspen. I know you guys are excited about that as well. How should we be thinking about that market opportunity in some of the investments that you're taking to kind of enable that revenue stream? Thanks, guys.

Aspen, I think it's very early, but that's the thing to know. This is a startup inside of Viva. It's moving very rapidly. It's on 90-day plans. So we have a, you know, a core market that we're going after, the horizontal CRM in a new way, in a new way that really enables AI and is built on modern technology. So the thing to know that it's very agile now. So what we're focused on is getting the product right, working with our early adopter customers. I'm 100% convinced that there's a market for what we're making in Aspen. can we can we execute well enough that's always the hard thing in a startup can you do it can you do it better than your competition um and what kind of luck do you have along the way that plays into it i've i've done the startup thing before uh starting viva i've done the startup thing when we started vault inside of viva we're doing it again and i have lots of friends that have done it and it's it's just like that can you execute well really really well and and what kind of luck you have on the way but sometimes you're wondering whether the market is there or not you know you could say maybe i we were wondering that when we were getting new markets going you know 18 months ago etc right now we have enough product and we're working with some early customers we're 100 clear that the market is there 100 clear it's just whether we can execute them and we'll see so your question was about how to size the the investment as well definitely very small on the viva scale it's not something that brian or cfo notices really on the on the viva scale because you have to keep that very small when you're working with early customers and you're iterating an early product and actually these days you keep it smaller than normal because the pace of the development is faster with ai you actually need a smaller amount of developers very very very skilled as well so it's not a financial drain on the company it's not a focus train and it's certainly not any kind of revenue that's figured into our plans at this time your next question comes from the line of ken wong with oppenheimer ken your line is now open all right fantastic thanks for taking my question i wanted to circle back on on falcon peter it was great to hear the customer interest.

Also great to hear it's not an extensive implementation process. But what I didn't get a sense for was, as you're trying to introduce virtual labor to your customers, is that a different counterparty that you're selling to versus maybe the CMO or the CIO? And then secondarily, how difficult do you expect it to be to maybe work through the inner politics of shifting the budgets from an IT wallet to maybe an HR labor wallet? Any help in helping us think through that?

Great question. Now, I'll be able to tell you this definitively now in a couple of years when we're selling lots of Falcon, I'll be able to give you the readout. So I'm going to gauge into the future and tell you what we know so far. First off, it's actually going to be an easier sale selling cycle because it is really not involved involved in agentic labor that's not something they're involved in um because it's it's not like that if you're selling a solution to safety this is about the budget of the safety team so it's it's really the head of the unit the business unit and the head of the sort of the operations of that business unit so that's that's super clear and the other question is yes it is a very related buyer it this is actually we have not hit the case for falcon where we're selling into a buyer that we are not selling into because we're always selling into the business side with our business applications now sometimes more or less um for example in the areas of falcon where falcon is playing For example, safety, clinical regulatory, that's always been somewhat more of a business cell. IT involved, but somewhat more of a business cell. CRM is the most IT heavy cell that we have in general. So these areas where we're doing Falcon, they were already, I would say, on the average, 60% of business cell. And those are people that we've been selling into for 10 years.

And then, Brian, just a follow-up on some of the investments. So it sounds like with Aspen, it might be sort of small up front, but as we think about you guys ramping on Falcon, ramping on Aspen, ramping on some vault agents, vault AI, I mean, should we expect maybe an uptick in terms of sales investments, R&D investments, anything we should be thinking about relative to how you guys are spending today?

You know, as Peter talked about, Ken, we're very excited about Falcon and the path that it can be on. But you've also seen us over time consistently think about both growth and profitability. And so it's not different entering a new market like Falcon. Maybe the dynamics of the market are very slightly different, but it's the same overall approach that we're taking there. And so we scale investment as we scale revenue. There's certainly nothing material that I would call out for this fiscal year. You know, it's all factored into the guidance that we've updated for FY27. And as we get, you know, another couple quarters ahead and gaze into the future of next year, we'll factor that into our guidance for next year.

Okay, great. Thanks a lot, Ed.

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

Hey, good evening, everybody. This is Ryan Pauzillion for a second tonight. Thanks for taking the question. Peter, maybe my first for you. From the customers that are planning to transition to Salesforce away from Viva CRM. What do you hear from those customers? What are they saying right now about the decision? And do you think, you know, longer term, it could be possible for Viva to win some of those back?

Yeah, Ryan, I do. There's a handful of customers, large customers that did select Salesforce, many of them even two years ago. Those projects are, they're having troubles, right? They're not going smooth and we have some project delays because it turns out the product is very deep and you need that. So, yeah, I think we can win back some of those customers, maybe some of them completely, others of them in some certain regions and not others. I think the bulk of that win back would probably be in 2027 and 2028 because Viva CRM, And they have that backstop until the end of 2029. So this is the time when it starts really to get real, right? Because during 2029, there's no more backstop of, oh, we can keep using Viva CRM, because they know they have to go to Vault CRM. Yeah, we're very optimistic about that, and the best thing we can do there to help that is really focus on our existing customers that did decide to go with us for CRM and make them very successful and improve the product and for the customers that didn't choose evo we have a good relationship with them and they've told us that hey you know we we said hey we want to be your plan b and they they really embrace that and that's that's the way they view that because um these customers they have businesses to run right they got to get their medicines to patients it's great they love having a a backup option if their if their plan a doesn't work out Really interesting.

I appreciate that. So, Brian, maybe my follow up for you. Can you just talk a little bit about what you're seeing on the R&D subscription line and maybe specifically where you see Viva in the journey between some of the, let's call them old guard products versus some of the newer growth areas that you're investing in, just as we think about that revenue mix shift and how it's unfolding? Yeah, it's a great question, Ryan, because we're right in the middle of that transition that you pointed to. And I think very pleased with the progress and the execution that we're making. But the old guard that you're referring to would be things like, I guess, ETMF and CTMF and QDocs and QMS and our regulatory suite that have fueled a lot of the growth in R&D to date. And a lot of the growth as you look out over the next few years to 2030 and beyond is being driven by a different set of products, EDC, ECOA, RTSM, safety, limbs. And these are big, very strategic products with a ton of headroom, but they're very early. So we're excited about that. We're executing really well against that. But there's a little bit of a changing of the guards that's happening there. And the S-curves don't stack up exactly. So you see some of that factored into the guidance for the balance of the year. But we're very confident and excited about the long-term trajectory of the PR&D business and obviously pleased to be raising the guide again here in Q2.

Very helpful.

Thanks, guys.

Your next question comes from the line of Alexey Gogolev with J.P. Morgan. Alexey, your line is now open.

Hello, everyone. I wanted to go back to the Falcon discussion. So with five Falcon early adopters and first goal eyes expected this year, What are the key readiness gates you must clear, and how do you expect the human-in-the-loop requirement to evolve by workflow type?

I'm sorry, Lecce, there was a breakup, and it said, what are the key you have to clear, and I didn't hear the word in the middle.

Peter, I was talking about the key readiness gates you must clear, and how do you expect the human-in-the-loop requirement to evolve by workflow type?

The key sort of regulatory hurdles, if I heard correctly, yeah. You know, agentic labor is like human labor, in a way. It's non-deterministic, so you have to prove that you have the right training and guardrails around humans, and that's the same thing we have to do around our agents. And the human, we provide for the human in the loop with Falcon as well, because you can see the outcome of what the agent did and does in inside of the vault application so from what we can see if it's working it's working very well it's not this approach is completely similar to what customers are doing today on certain internal projects the difference is they would like to be able to do it at scale in a very repeatable motion so you know i would guess three Three years ago, we would probably have to be teaching the customers a lot about what is AI? What is the genetic labor? How do you do this? How do you do that? That's, we really don't have to do that so much anymore. The customers know how to deal with it. They just want some partners that can scale it across multiple areas.

Thank you, Peter. And also on the data cloud topic, so you added 14 data cloud customers. Where is data cloud proving most differentiated, and how are you positioning connected data as a prerequisite for AI outcomes in commercial workflows?

So, we don't position data cloud as a prerequisite for AI. It's more of an accelerator. The cleaner your data is, the better your AI processes are going to work, especially in certain areas. You know, what's working well for us in data cloud is open data, so clean reference data. Now that's a hard project to do because it involves changing a lot of things in downstream systems, but we have some momentum there and I think that's going to continue. We have strong momentum in Compass for certain therapeutic areas of complex therapies where our compass products can see different things in the in the flow of complex products in the u.s that other people other offerings can't see and then we're we have real market leadership with our link product and link key people and we're expanding there with the add-on products of links so link medical insights link key accounts for the u.s link workflow for congresses so overall data is not a thing that can accelerate very, very fast. It's not like selling fast fashion on Instagram, right? That can accelerate fast and then disappear. Data is not like that. It's a long, slow grind, but we're certainly happy with our progress and it's very synergistic with Viva. If you look at why is Viva being successful, we have a very synergistic product plan. We have software applications that work with our data and consulting that knows about our software and data and we have agents that work with our applications that are known by our consulting and that leverage our data so it's it's um it's not a random set of products it's a we're building the industry cloud and the more more our customers realize it the more benefits they get because things fit together thank you peter your next question comes from the line of david windley with jeffries david your line is now open hi good afternoon thanks for taking my question i wanted

to ask peter on falcon quickly are your early adopters exclusively sponsors or oems or are you also seeing some service providers approach you to adopt falcon capabilities our early adopters are with sponsors.

Now, we have had some interest with service providers, and I say that carefully, interest. They're interested, but we really haven't engaged heavily there yet because you have to be focused when you start working with your first customers. Service providers will have similar needs to sponsors, but not the same. So, we're focusing on the sponsors first, and I I only expect over time that this will be, you know, useful for outsourced service providers, but we have to work on the sponsors first.

Great. And pivoting for my follow-up, a lot of moving parts in China over the course of this year, maybe over the course of the last several years, regulatorily, drug development-wise, et cetera. How do you see the China market as an opportunity for Viva right now?

Yeah, China is certainly moving fast. I mean, you know, when we look at my tech career standing, oh, you know, it's over 30 years here. It's just, you know, astounding the transformation in China and what it means for the global economy and what can be accomplished and the whole notion of a parallel tech stack in China. So yes, it's moved so fast and it continues and it's great to see that from my perspective. It brings variety. So our opportunities there, we have quite a few products that are made by our Viva China team in China for China. So we have our China CRM suite and that's gaining market share. That's written on the China tech stack, et cetera. We have our data products made in China specific for the China market. And there's other things that we can do in China there in China for China. But one of the big benefits is those products fit with our global products. For example, China CRM fits with our global Promomaps products. So there's a synergy there. China's good business for us, and we're proud to do that in China, and it's profitable for us there, and it's growing. But it's also synergistic with our global business because Because our global customers, when they have their headquarters in the U.S. or Japan or Europe, they want a team, a global Viva team, that can help them with China also. So it's very synergistic. We really love our China business. Thank you.

Your next question comes from the line of Rishi Jalaria with RBC. Rishi, your line is now open.

Oh, wonderful. Thanks so much for taking my questions. Nice to see continued strength in the business. I want to start with a question on Aspen and the pricing model. I think the publicly posted pricing model is really interesting and compelling as application software companies are trying to figure out the pivot to more consumption, et cetera. And you're talking about charging per human or per agent. Can you maybe walk us through how you see that pricing model starting how you know the puts and takes of that and what lessons or learnings can kind of be picked up from that as you see more falcon adoption more ai adoption within the broader viva suite and you know trying to kind of price accordingly for this new ai world and then i've got a quick follow-up yeah the so cloud software you know we got to remember it hasn't been around for 50 years right i was working on it in the early days of salesforce.com and that was not even 25 years ago right it was you know for me it was 23 years ago so very early and the pricing

model sort of arrived and a technology model arrived and the way we do things arrived and you see that all in the first generation big cloud companies big cloud application companies there's a way you do things right so aston is taking a different approach that may or not prove may or may not prove effective it's to say well it's a different approach a different technical stack a different approach there and a different pricing approach it's just much more simple you get your productivity fifty dollars you know fifty dollars a user a month so it's not this crazy price and you can't you don't know what it is and you have to haggle with your sales rep for discounts and if your big company is this and that and 14 different editions no it's more like modeled off of amazon web services there's a price okay and it's a good product you can buy it You don't have to buy it. It's a good product. So we will lean into that. And then there's course usage overage. Okay. Let's say you buy five users. It's $50 a month and you put a terabyte of data in there for some reason. Well, okay. Well, that's not anything that anybody thought about. So there'll be overage charges that you will pay monthly on the overage. So you kind of, it's a mix. You get, I would say we're shooting for mostly predictable because that's at the end of the day, large businesses would really want mostly predictable, but you have to have this escape patch to say, yeah, I can't use unlimited compute because that's, you know, that's kind of, that doesn't make sense. So now we're also going to listen to our early customers, and we're a very customer-friendly company. And if there's a better way to do it, we'll certainly do that. We're after, authentically, customer success. You've got to remember, we're a public benefit corporation. We're after success for our customers, the industries we serve, and Viva, and our investors. So the thing is, make it simple. Get rid of all this noise that has built up in the systems over time.

Now, that's really helpful. And then maybe just thinking through as Falcon and kind of your AI products grow, can you talk a little bit about under the hood what sort of the AI stack looks like? And maybe more importantly, as these become a bigger portion of the business, drive greater usage and obviously, as you pointed out, greater customer success, how should we be thinking about the impact on margins, both gross margins as well as free cash flow margins? And, you know, is there opportunity over time to leverage more multimodality and even some of the open weight models as they improve to, you know, control some of that potential gross margin headwind?

Yeah. You know, again, I don't really want to make predictions on Southend because it's early. But in general, I don't think we're going to have a gross margin problem. I think the gross margins will be roughly similar to our software. And here is why. When we really go deep into Falcon and we have what we call Falcon copies where we have the real customer data that we're testing the agents with and developing the agents with, we know what's going on. So more and more and more of that work goes into the deterministic software. And we use the non-deterministic models, the anthropic models, et cetera, when we need to. So it's not, you know, a lot of this value is going into the agent. And then I believe everybody knows that the cost of these models are going to go down, whether they're with better hardware or open weight models or et cetera, et cetera. The current cost of the models is not sustainable, not based on what we're doing, but based on this notion of what software development is doing, you know, eating up 50 percent of the tokens in the world and hundreds of billions of dollars. somebody's going to build a better mousetrap for that over time and that'll that'll compress the prices that's our belief but even if that wouldn't happen I think Falcon would be a great business because we're pushing a lot of things into the deterministic layer all right very helpful thank you so much Peter your next question comes from the line of Tyler Radke with Citi Tyler your line

is now open yeah thank you for taking the question um brian uh just going back to your comments on the r d side of the business and talking about kind of the stacking of um those s curves i was wondering if you could just be a bit more um precise in in terms of the timing um and when you see the kind of the growth inflection happening from from those s curves and if you were to just sort of stack rank those products you mentioned? What sort of have the biggest opportunity to be, you know, the next 500 million or billion dollar products within R&D?

Yeah, thanks for the question, Tyler. You know, I think we are excited really about all of those products. All the five that I mentioned, EDC, ECOA, RTSM, safety limbs, every one of those is very large and very strategic in their area. Few of them are around clinical, safety is its own big space, limbs is in quality. So each of these is very significant opportunities and it's slightly different stages as you look across them but all of them pretty early. And so I think that's what gives us the confidence as we look out to 2030, for example, that we're on track for those goals is we're making great progress in the product, great progress in the execution, great progress getting customers live and happy and successful and reference selling. We don't put exact timing on that, right? We don't generally talk year by year, so I'm not going to give guidance out beyond this year. But I think we feel very confident in the trajectory that we're on with those products in R&D.

Got it. And then in terms of Aspen and sort of your broader ambitions, you know, across, you know, industries outside of your traditional segments, like, can you just remind us the sort of the ICT there? Or is it, you know, smaller organizations? Or how do you, I mean, clearly such a broad opportunity. So how do you start and prioritize that and staff it? There's a few different dimensions. Go ahead, Peter.

For clarity, ICP, what is ICP?

Oh, like the ideal customer profile. Yeah, yeah.

Oh, okay. I'll take that one. Yeah, the ideal professional profile when you're just starting out is really a nimble type company that really wants to work with you. And I think in this area, you know, we're going to probably get a lot of young tech startups, right? Because they're doing something really innovative in what they're doing, and they don't really want to do the same old thing in CRM for core, you know, account, contact, opportunity management. So I think we have early indications that they'll be great companies to work with. But we'll see. Again, I'll let you know a lot more in a year.

I'm sorry to throw in enough.

Your next question comes from a line of Jalendra Singh with Truist. Jalendra, your line is now open.

Thank you. And thanks for taking my questions. I want to go back to the discussion and the five early adopters. there. It seems one of them is a top 20 pharma company. Based on your conversation with these top pharma companies around Falcon, do you believe that the work they'll be shifting to Falcon is something they were outsourcing to other partners such as CROs, or should we think about something they were doing in-house and now they are leveraging Falcon for that? And related to that, any incremental color on the pricing of the Falcon products?

In terms of where labor is done or where will just be displaced i think there'll be a combination of internal and outsourced although generally not the cro's that's not what i see it's it's a different type of outsourcing some of it from the cro's but but not not most of it um and then in terms of the pricing uh it's very early for that i know we've you know been in discussions with customers and their their desires for predictability that's for sure right they want predictability for that because for one thing they get that predictability when they either hire or outsource labor it's it's quite predictable and it's better for them it's actually better for us too so but what gets in the way of that a little bit is well Falcon is quite early now so it can do certain things but it can't do the things that it will do three years from now so how do you have a fixed price when your capabilities are rapidly improving so i think with some of our customers we'll end up having enterprise license agreements enterprise subscription agreement for for the labor based on the size of their company or their function but it will probably escalate over time it will be lower in the beginning when falcon is less mature so if you want a teenage falcon that costs you X. And if you want a Falcon and a 25-year-old, it costs you a bit more. I think it's going to be like that. But again, this is the type of thing you work out with the early adopters. The nice thing here and the structural advantage that we have is this is the same buyer facing the same business problems as our applications. These are people we know deeply that trust is there. You will hear people say business moves at the speed of trust, and there's a lot to that, and we have the trust with these customers. So we'll get to the right story pretty quickly. All this hinges on having a product that works well, and that's really where our focus is. I would say our early signs are good. When I talk to the engineering and the product management people in Falcon, there's an optimism. you know you'll see even the pessimistic ones saying like oh my goodness this could really work and in some early test runs it's like wow we tested this against the humans what the humans did and how can they ready better than what the humans did so there's this sense of optimism but it's you know it's too early to declare success we have to be very paranoid and pessimistic because we're going into something we haven't done before. Viva has never done agentic labor and the whole motion is new. That's why the leader of Falcon reports right to me. This is a complete new market and a new motion for Viva. So we don't have all the answers yet.

It makes sense. My big follow-up on other points you raised in your paper remarks. And somebody asked that earlier about your focus on CRM winbacks among top 20 companies that did not select Valve's CRM. I understand your point that you want to share success stories with them. But just curious, have there been any development or conversations with customers who have picked Salesforce that is driving that confidence that these opportunities are more actionable? Or is it more around delays and rollout by Salesforce that's giving you confidence or opening a window? Just curious, it seems like you're a lot more explicit this time around than the past.

Yeah, it's based on our execution and what we're seeing with Salesforce as well. I think Peter alluded to earlier how Salesforce has been struggling with some of the larger projects that they have, and they don't really have any customers live. And when you look at what Viva's doing, it contrasts pretty significantly. We have over 180 customers live. We have customers that are turning AI on. We had a big milestone in CRM this quarter where one of our top 20s turned AI on in CRM for their entire field force. So really significant milestones. So the contrast between how Viva is executing and what we're seeing on the other side is very significant. As Peter mentioned, we're very close with these customers. They buy a lot of products from Viva. We have deep relationships. We stay very close with them. And that's what gives us the confidence, our execution, our innovation, getting customers live, that trust. And that's why you hear the bullishness and the confidence in those winbacks. Just more broadly in the overall market, we're executing very, very well in CRM. It's really clear that we are the market leader. We're going to maintain the market leadership position. And just to kind of paint what we view as the end state, we see Viva maintaining over 70% share in the CRM space, which means we'll continue to execute, we'll continue to drive innovation for our customers. So we feel really good about how CRM is playing out.

I would say you asked about our customer interactions there, yes, we have customer actions. There are lots of people at Viva do with these customers, and I personally do at times too. And you know, a common thing you might hear from a customer is, we're not ready to make that decision yet, right? So you know, they're open to it, they're looking to it, they're not ready yet. So those types of things give us confidence.

Great. Thanks a lot.

Your next question comes from the line of Craig Hattenbach with Morgan Stanley. Craig, your line is now open.

Thanks. And great discussion around all the AI developments. Peter, from a macro perspective, you know, after a couple of volatile years, whether it was IRA, MFN pricing, tariffs, you know, the backdrop has steadied. So I'm curious, outside of Agentic, in your customer discussions, what are they most focused on? You know, what areas in terms of are they leaning into investments that you're seeing in the business?

Yeah, Craig, it is interesting. We think things are steadied. It is an interesting comment on the world, right? We had two, you know, kind of major wars going on. We've got a complete tech disruption in AI that's, you know, going on, and I think what happened is the life sciences industry has gotten used to hey the world is going to have a lot of moving parts and you know they're just moving they're just moving forward so I think it's um you it's you're good to point this out they're not being disrupted by this disruptions if we would have something really catastrophic in the future that can always disrupt them so for example you know and I'd you know if we had a major major shift in interest rates well life science is a capital intensive industry that that can do things with major escalations in war that

that can do things but so far industry seems to be executing pretty well and focusing on the jobs to get done got it and then just on my follow-up for the edc um segment you know compared to one or two years ago as that was ramping that got a lot of attention um can you just maybe give us an update on just how those ramping deals are progressing and then just the opportunity to to capture additional top 20 over time?

Yeah, the EDC is one of the larger areas and it's certainly a long implementation cycle. So some of our wins are still ramping. And, you know, we're working with the other ones. We have, I believe it's nine out of the top 20. Most of the other ones are with metadata, not all. And, you know, we're working on those over time, but it's not the right time for all customers to change out all systems at one time, getting back to, you know, they have many other things to do. I would go back to this structural advantage we have in the development cloud, applications all on a common platform, and then with Falcon as well. The structural advantage with Falcons, more things to bring to the same buyer, and especially in clinical, having the clinical operations, clinical data management, and our site solutions. That's a site solutions is very strategic to us, and we're introducing e-source there. So I think confident on EDC over time, it just takes a while. And that's something that I think you'll see progress in the next couple of years there.

Helpful. Thank you.

Your next question comes from the line of Andrew DeGaspri with BNP Paribas. Andrew, your line is now open.

Thanks for fitting me in. I just wanted to ask one. First, I think you're coming up to the one-year anniversary of your partnership with IQVIA the settlement with them. So I just wanted to understand how is that going? Have you seen any more of them? Because we haven't heard much from that deal and wanted to know if you, is it going ahead of expectations or in line or below?

We're really happy with that IQVIA partnership. Gosh, that's, and I discuss with the management team of IQVIA and I can represent that they represent to me that they're very happy with the partnership as well. So yes, and customers are especially appreciative of it, right? Much less hassle working with Viva and IQVIA. I think great things are going to come out of that partnership. They're already starting to come and I think there's more to come. When you look at it, IQVIA and Viva, we're both major players to the life sciences industry. We are the two major your players, I think it's fair to say by far. And AI is transforming the industry, and for AI, you need services, you need data, you need software. So the more even IQVIA can collaborate, the better it is for the industry, helps the industry grow, helps Viva grow, helps IQVIA grow. So I couldn't be more happy with that. If you ask me, I feel 500% better about our IQVIA relationship now than I did two years It's probably the best thing that happened to our company, you know, 12 months ago, and that was just outstanding. So, super happy with that.

Thanks. And then I'm curious about the double-digit growth you mentioned in the commercial cloud business, even excluding CrossX. And I just want to unpack that, like, in terms of the – did it come from Promomats and some of the other marketing tools, or was there something unique about the CRM side that gave you, was giving you that, that, that acceleration?

Not really any one factor that I'd point to, Andrew, and I think that's part of what actually makes us feel so much excitement and, you know, the results is that it was CRM. It was add-ons and new customers and content. It was new customers and brands in data cloud. It It was continued growth in CrossX on both the measurement and the audience aside. It really was broad-based growth around commercial. And I think, I guess what I'd point to is some of what Peter and Paul have mentioned is that full commercial story and full capability of all those products on one platform, from one provider, really resonating in the market and driving growth. So a very strong quarter from commercial.

Thank you.

Due to time, we ask that you limit yourself to one question. Thank you so much for understanding. Our next question comes from the line of Dylan Becker with William Blair. Dylan, your line is now open.

Hey, guys. Appreciate it. Maybe, Peter, if we touch on the strength in consulting and services, I know that there's several components to that, but how would you classify the value of efficiency of being able to do more with the same kind of amount of your existing resources versus the efficiency gains you're seeing there enabling your customers to go faster and capitalize on kind of more of the AI opportunities, maybe meet their kind of increasing willingness, if that makes sense. Because it does seem like that's another area. I know it's not perfectly correlated to the subscription side, but continues to see healthy momentum and driving that change management for lot of these enterprises.

I think that the big benefit for Viva that we will hopefully see over time here is that by more tech enabling our consulting and our especially our services, our software will become more valuable. So for example, if somebody wanted to buy our EDC and if it took a billion dollars to implement, nobody would buy it. But if it took ten dollars in a week, everybody would buy it so the faster you can have your your implementations go and the more accurate the less the less cost the more valuable your your applications become um so that's that's the big driver um yes it probably means growth for us in services because people will buy more services uh but it's it's about customer success and the industry's success and and driving our application business. I overall think it'll be a renaissance for services and consulting companies as we go forward, because I think this notion of tech-enabled services, specialized tech-enabled services, is really going to drive growth, rather than going to generalists that say, hey, I have people that can do a lot of things. No, you have a job to get done. You'll probably go to the specialist that has a tech-enabled service that can get that done, And I think that will actually lead many companies to do more with partners rather than doing it internally, because they can get the outcome quicker and better with the tech-enabled service.

Your next question comes from the line of Tamjid Chowdhury. With Guggenheim Securities, Tamjid, your line is now open.

Thanks for taking my questions. And I guess, Peter, I wanted to ask you a question on a recent management change. It was announced that Tom Schwenger will be leaving the company to go to a longstanding partner of yours. And we understand that he played a pivotal role in many of the company's top 20 biopharma wins. So, how should we be thinking about the current transition of his responsibilities and maybe the impact of his exit on the relationship he has helped curate over the years, if any?

Yeah. Tom was at Accenture before he came to even many years ago and was a great Viva partner at Accenture. And Tom's going to go on to be a CEO of a services type partner, and we think that he will be a great partner for us there now. So, you know, all good there. Those relationships don't go away that Tom has, so he will keep those. And in terms of EVA, when a customer, especially when you mentioned CRM, gosh, that's a business critical decision that lasts for 10 years. It's involved. There's many, many people involved in that and there's a product involved with that so i don't that won't tom's departure won't have effect on our crm business because that's more of a it's an enduring long-standing thing it's it's um different than maybe consulting type work or something like that this is a product attachment so um that's not going to affect our business your next question comes from the line of billy fitzsimmons with piper sandler billy your line is now open perfect Thanks so much for taking the question here.

Congrats on the two big top 20 biopharma wins for Vault CRM in the quarter. Could you give a little more color on how those deals played out, what ultimately drove them to Viva over Salesforce? And for the top 20 vendors that have not decided yet, has your level of confidence changed in potentially winning those versus, say, 90 days ago? Thank you.

So first, we're excited about the exceptional quarter that we had, and that was one of the headlines. You heard us talk about three large companies, two in the top 20, Lilly selecting Vault CRM, Biogen selecting Vault CRM, and then, of course, we had Regeneron as well. The why is pretty simple, and I think we touched on it on this call, right? It goes back to trust, so they trust Viva to be able to deliver, and then product, product The product is working. We are delivering on the promise of all the innovation that we've pulled the market we would execute on, and that's playing out in the marketplace. So it's trust, and it's a great product. I mean, it simply comes down to those two things. In terms of the remaining top 20 commitments that are out there, there's only two left. So we have 12 of top 20, and there are two remaining. and they'll play out by the end of this year, but we feel good about both of them. They still need to be finalized, but we like our chances in both, and we'll update you as things play out.

Your next question comes from the line of Ryan McDonald with Needham & Company. Ryan, your line is now open.

Thanks for taking my questions, and congrats on a nice quarter. Peter, an emerging trend that we've been seeing across large healthcare and life sciences organizations within the industry this year is one in which customers want to embrace AI, but they don't want to take the risk on a new and unproven entrant that offers AI for only a specific point solution or a niche use case, as they don't have the time to evaluate hundreds of new vendors. And it sounds like they'd rather consume AI from the incumbent platform vendors that they're already deeply embedded with. So one, are you getting this same feedback from your customers? And two, does this dynamic create an opportunity for you to perhaps ramp up the M&A activity, acquire similar types of AI point solutions like Copley, and sell it into your existing base faster than what one of these smaller AI solutions could do on their own? Thanks.

Sorry, I was giving a great answer on mute. The customers want to be out of the experimentation phase. They definitely want to be out of that. So some months ago when we first introduced Falcon, I had customers come up to me personally. We were at an event and they said, oh, thank goodness you're announcing that because that's, thank goodness you're announcing that because that's, I didn't want to evaluate all these small vendors, you know, so now that you have an offering that helps me not have to go and look at all these small vendors. So yes, it's absolutely what customers want. In terms of acquisitions, we may find others that are a cultural fit, but we'll be very discerning. You know, Coply was an excellent acquisition for us. And by the way, the Falcon, which is now Falcon MLR, that is maybe our sales cycles there are probably more advanced than in any other part. That market is very ripe for things. But in these other areas, we're getting started and we're making a lot of progress with Falcon. So if we're going to do an acquisition there, it would be more for talent acquisition and not for product because we've put a real good base in Falcon product and Falcon platform. I don't think we'll need acquisitions for product anymore. We did look at some when we were just starting Falcon. We looked at a number. I would say at least 20 companies to look at. We found one that was the right fit of culture product and that you know of willingness to be acquired and we found that in coply so it's sometimes like that i for falcon i don't actually expect us to find another acquisition that fits and we're not dependent on any acquisition but but we'll see what happens your next question comes from the line of gabriella borges with goldman sachs gabriella your line is now open Hi, everyone.

This is Grayson on for Gabriella. Thank you for taking our question. Just one on Aspen. What are the specific customer problems that Aspen is aiming to solve that, you know, maybe the existing horizontal CRM platforms struggle with? And what are the milestones that you would point investors to watch for over the next year? Thank you.

In terms of milestones, I think it's probably just, you know, the things that we say on our earnings calls and things like that. That would be, because there's not going to really be visible milestones, I would say. We'll probably give you updates when, you know, when the time is there. You know, how, and your other question was basically how will things be better? Is that what the question, if you could rephrase that again? yeah just what are the specific you know customer problems that you're aiming to solve with aspen um versus what some of the existing horizontal crm platforms struggle with today yeah so the couple one is price price being unpredictable getting out of control that that would be one um the other one would be just sort of dependability of the vendors right that you can And you can really count on the vendor to be on your side. Scalability of the vendor, right? Sometimes they want something that really works for a small company but can scale up to a very large. Now in the market, you have to pick, like, do I want something that works for a small company or do I get something that's too big for me now but it can scale up? Other things are just like, you know, data entry. The existing CRM systems really, if you get into them, like, okay, they require a heck of a lot of data entry. most of that with AI doesn't need to be done anymore. And then I just think there's this other fundamental thing of better CRM system. And that's just the details of a fundamentally better data model, better business logic, better just details. Like how do you handle multi-currency? How do you handle forecasting? How do you handle implementation so that you can get the CRM you want for your company in three months rather than getting half of what you want in three years? So I was on the board of Zoom for many, many years, and, you know, Zoom was a very small company when I joined. And very few investors wanted to invest in Zoom because they thought, well, there's already WebEx. there's all these other things. But Eric, you know, had an idea, but mine will be fundamentally better, better, better. And that's the same idea here. Now that's unusual that that could be disruptive, but I think in this case it will be. Better, nicer, less expensive, more predictable, faster. I think all those things add up.

Our last question comes from the line of Scott Schoenhaus with Keybag. Scott, your line is now open.

Thanks guys for squeezing me in. I wanted to drill more into CrossX. From 90 days ago, are you seeing from your purview from CrossX, are you seeing pharma marketing advertising budgets become better than they were 90 days ago? And do you think that AI is helping to act as a catalyst for pharma budgets, not only across CrossX, but the overall pharma digital advertising space. Thank you.

Yeah, we continue to see strength in the pharma marketing budgets and spend on digital, and that's playing out in CrossX. We had another strong quarter of performance in CrossX. AI, what role is that playing? I think that's a nice long-term benefit and driver of what we're doing in CrossX as companies. And you've probably heard us talk a little bit about helping companies become an agent at commercial, engage with doctors via AI. They're turning more and more to AI. And as that becomes a more important channel, CrossX becomes more important in terms of measuring and understanding and optimizing against that spend. So yeah, absolutely. AI will be a nice and for the foreseeable future for prospects.

We have reached the end of the Q&A session. I will now turn the call back to Peter Gassner for closing remarks.

Thank you, everyone, for joining the call today. And thank you to our customers for your continued partnership and to the Viva team for your outstanding work in the quarter. I'm looking forward to speaking with you again on our upcoming Investor Day on November 5th. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.