Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Veeva Systems Fiscal 2019 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. Rick Lund, Head of Investor Relations, you may begin your conference.
Good afternoon. Welcome to Veeva's Fiscal 2019 First Quarter Earnings Call for the quarter ended April 30, 2018. With me on today's call are Peter Gassner, our Chief Executive Officer, Matt Wallach, our President, and Tim Cabral, our Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, our strategies, and the anticipated performance of the business. These forward-looking statements will be based on management's current views and expectations and are subject to various risks and uncertainties. Actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-K, which is available on the company's website at veeva.com under the Investors section and on the SEC's website at sec.gov. Forward-looking statements made during the call are being made as of today, May 24, 2018.
If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. On the call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K filed with the SEC just before this call.
As a reminder, beginning this fiscal year, we adopted the new revenue recognition standard commonly known as ASC 606 using the full retrospective method, which means that we have adjusted certain of our fiscal 2018 financial information according to the new standard. Please note that all results and guidance mentioned on this call and contained in our earnings release reflect the application of ASC 606. With that, thank you for joining us, and I will turn it over to Peter.
Thank you, Rick, and thanks to everyone for joining us today. I'm pleased to report another strong quarter for Veeva with financial results above our guidance. First quarter total revenue was $196 million, up 22% YoY. Subscription revenue grew at 21%, and our non-GAAP operating margin was 32%. It was a great start to the year. The Veeva team executed exceptionally well. I'm encouraged by the pace and level of innovation we're delivering for customers and the life sciences industry overall. I'm also encouraged by our continued execution and attention to detail as we scale the company in multiple product areas, customer segments, and geographies. We just got back from Veeva Commercial Summit, where we brought our customers together for a great event in Philadelphia.
This year, we had 1,500 attendees, making it our largest event ever and the biggest commercial life sciences gathering of its kind. At Summit, we announced a major new product, Veeva Nitro. Nitro is a next-generation commercial data warehouse built specifically for life sciences. Nitro was very well received because it has the potential to eliminate another major custom system that has been a real burden for our customers. It also sets up customers to fully leverage the power of AI as they look ahead. Today, life sciences companies largely build and maintain their own custom data warehouses for the commercial side of the business. It's a significant challenge and often repeated on a region-by-region basis. First, it's hard to find the right resources to build and maintain a data warehouse.
Once developed, these point-in-time systems quickly fall behind. They end up being replaced every 5 years or so. Most were built for business intelligence and reporting only, so they don't provide the right foundation to support AI. It's similar in many ways to what we saw with CRM 10 years ago or content management 5 years ago, in that the market is not being served well with any packaged cloud solution. Customers are having to piece things together themselves. Veeva Nitro offers a next-generation data warehouse built specifically for commercial life sciences. Veeva Nitro is a packaged cloud software solution that continually improves over time and includes an ecosystem of services and solutions around it.
It includes a pre-built data model and pre-built connectors for key data sources so companies have a data warehouse that's architected to quickly support their global and regional needs from analytics to reporting to AI. Veeva Nitro is a big deal for the industry and for Veeva. It's a long-term commitment to a significant and important area. It could eventually help to transform customer engagement in life sciences for the better. It's Veeva's first true analytics application, which will stretch us in new ways. Nitro is about innovation for the industry and for Veeva. Nitro is currently available in Japan for early adopters and planned for North America by the end of 2018. At Summit, we also let customers know of our intention to develop an AI engine specific to commercial life sciences that would use Nitro as its data source.
AI is an important technology where I believe Veeva can provide a valuable offering. We also think choice is needed at the AI layer, and we fully support our partners like Axtria and ZS, who currently provide AI solutions for our joint customers. We're looking forward to working with Axtria and ZS to leverage Veeva Nitro as a data foundation for their AI solutions. Turning to our results for the quarter. First, in Commercial Cloud, where we had another excellent quarter in core CRM and the CRM add-ons. For example, in Q1, another top 50 pharma committed to expand their use of Veeva CRM to their European field force. They chose Veeva because they know Veeva CRM works well, and they trust Veeva as a long-term partner.
It also supports their drive to harmonize systems, which is a continuing trend we're seeing that's driving enterprise customers to standardize on Veeva CRM globally. We're seeing the continued momentum of Veeva CRM within small and mid-sized companies as well, with 14 new SMB customers added in the quarter. Uptake of the CRM add-on products also progressed quite well in Q1, with a number of wins, including a top-20 pharma who selected Veeva CRM Events Management for their U.S. teams. Overall, we're very pleased with the performance of Veeva Commercial Cloud and excited about the opportunity to extend the value we provide with Veeva Nitro. We also had another excellent quarter for Veeva Vault. On the R&D side, Veeva Development Cloud is really resonating.
With Development Cloud, we are uniquely positioned to help customers streamline drug development with unique application suites for clinical, quality, regulatory, and soon, safety, all built on a single modern cloud platform. We believe this will be transformational for the industry over the long term. A key Development Cloud win in Q1 was with a top-50 pharma who selected Veeva Vault eTMF, Vault Submissions, and Vault Submissions Archive as their enterprise standards worldwide. This customer was prompted by the need to unify systems and processes and improve compliance. They're an existing Commercial Cloud customer, and these new applications are their first purchases in R&D. When they're successful with these products, there is the potential to expand to other areas of Veeva Development Cloud over time.
In addition to the top 50 RIM win in Q1, we also had a top-five pharma go live in the quarter with the first phase of their Vault RIM project. This go-live is very significant because it's our largest RIM go-live to date and a big milestone for our regulatory products. Congratulations to the customer and the Veeva team for achieving this important milestone together. It was also another great quarter in quality and in clinical, with a number of notable new wins and go-lives. In the clinical operations area, eTMF continues going strong. Q1 was our second-best quarter ever for Vault eTMF sales. We also secured our first win at a top 20 for Vault Study Startup. Study Startup is a relatively new software category emerging to address an area that's historically been underserved.
Once live, we anticipate this could be an important lighthouse account for the industry as they look to gain considerable efficiency in the study startup process. Vault CTMS also continues to gain traction. We now have 24 customers with 10 live. This is amazing progress for a product that has only been available since April of last year and is a strong indication of the pent-up need for innovation in clinical. Vault EDC is also progressing well. We now have nine early adopters and three are live. Our early customers are happy and enthusiastic about the product. One of our first live customers and their CRO presented at a clinical data event we held in Q1 in Boston. They detailed their success with Vault EDC, specifically citing the modern technology and speed of study build advantages they gained with Veeva.
It is still early days for Vault EDC. I believe we are on the right track and can be the long-term leader. Finally, I wanted to give a brief update on Vault QualityOne, our quality product suite for companies outside of life sciences. We added new customers in the quarter and continued to make excellent progress with early adopters in their deployments. The team is preparing to host their first customer event next month in Cincinnati, which is an important milestone and will be a great forum for our early customers to share their successes and lessons learned. In summary, it was another great quarter. Our pace of innovation, technology leadership, and focus on customer success continues to give Veeva a major strategic advantage. We are paving the way for strong growth well into the future with a broad and growing suite of products.
I appreciate the great execution by the Veeva team and the trust and confidence of our customers and partners. With that, I'll turn it over to Tim to review our financial results in more detail.
Thanks, Peter. Q1 was another quarter of consistent, strong execution. Subscription revenue was up 21% to $156 million from $129 million last year. Momentum across our product lines continued to drive strong growth, especially within Vault. Services revenue was more than $39 million, up 29% from over $30 million one year ago. This was a material outperformance from our expectations, primarily driven by heavy demand within Vault R&D. In addition, we did benefit from some one-time items in Q1, we expect Q2 will likely be $1 million-$2 million less sequentially. Total revenue was over $195 million, up from nearly $160 million one year ago, a 22% increase.
Vault represented 44% of total revenue, up from 37% in Q1 of last year. Our non-GAAP operating income came in at almost $63 million, a 32% operating margin, which was above the high end of our guide. This was driven primarily by outperformance on the top line. Across the company, we added 72 people net in the quarter, finishing at 2,243, up from 1,874 one year ago. Turning to the balance sheet, deferred revenue was $290 million compared to $267 million at the end of the fourth quarter. This resulted in calculated billings of $214 million, which was ahead of our guidance of $200 million-$202 million.
This result was driven by the outperformance in services revenue, better than expected billings duration for the business closed in Q1, and strong bookings. Please remember that there are numerous factors that make YoY comparisons of this metric highly variable on a quarterly basis. Therefore, we do not believe it is a good indicator of the underlying momentum of our business, and we do not manage to it internally. Our subscription revenue guidance and calculated billings guidance for the full fiscal year are the best indicators of our momentum. Looking ahead, we expect calculated billings of roughly $175 million in Q2 and $900 million-$905 million for the full year, which is an increase from the $875 million-$880 million guidance provided last quarter.
As you consider the full-year guide, please note that during the 1st quarter, we had a large customer move their renewal date from Q1 to Q4. This means we billed the customer for nine months in Q1, and we will bill them again for the full annual amount toward the end of Q4. This results in an incremental $18 million worth of calculated billings for FY 2019, which is included in our guidance for calculated billings. With this dynamic, we are now expecting about 41%-42% of our billings for the year to come in Q4. Considering calculated billings, please remember that with the adoption of 606, the new formula for calculated billings is now revenue plus change in deferred revenue minus change in unbilled receivables.
Elsewhere on the balance sheet, we exited Q1 with $918 million in cash and short-term investments, up from $762 million at the end of Q4. This increase was driven by our performance in cash from operations, which came in at $151 million. One thing to note, we issued an invoice late, which resulted in a collection of $20 million in early May that normally would've been collected in Q1. Also note that Q1 cash flow benefited from about $10 million worth of excess tax benefit related to equity compensation. For the full year, we now expect cash from operations to be at least $240 million, excluding this excess tax benefit. Let me wrap up by sharing our outlook for next quarter and the rest of the year.
For the second quarter, we expect revenue between $203 million-$204 million, non-GAAP operating income of $64 million-$65 million, and non-GAAP net income per share of $0.33-$0.34 based on a fully diluted share count of approximately 155.5 million. For the year, we now expect revenue in the range of $826 million-$830 million, an increase from our previous guidance of $815 million-$820 million. We now expect subscription revenue to be roughly $680 million for the full year. We continue to expect Commercial Cloud subscription revenue growth of about 10% over last year and Vault subscription revenue growth of more than 40%.
For fiscal 2019, we now anticipate non-GAAP operating income of $261 million-$265 million, a margin of almost 32%. This is an increase in both dollars and margin from our prior guidance of $250 million-$255 million and a margin of about 31%. We are now targeting non-GAAP net income per share of between $1.36 and $1.38 based on a fully diluted share count of approximately 156 million. To conclude, I'm very pleased with the way that our team has started the year and with our increased outlook for the remainder of the year. Our field teams are executing, and our product teams continue to innovate. Given this consistent execution, we remain confident in our ability to deliver at least 20% subscription revenue growth through 2020.
New products like Nitro, an opportunity similar in size to our core CRM product, provide us with yet another vector for driving growth over the longer term. As always, thank you for joining the call, and I will now turn it back to the operator for questions.
At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Rishi Jaluria from D.A. Davidson. Your line is open.
Hey, guys. Thanks for taking my questions. Wanna dig a little bit more into Nitro. Definitely an exciting announcement. You know, I guess to start out with, can you talk a little bit about the decision to use, you know, AWS Redshift, and maybe what the economics of the partnership looks like? Is it gonna be something similar to CRM? Maybe alongside that, you know, why the partner versus, you know, building kind of your own system from the ground up like you do with Vault? I have one follow-up.
Great. This is Peter, I'll take that one. Yes, if we look at Veeva Nitro as being a commercial data warehouse application, there's many technologies that would go into that, some of which we're gonna build, some of which we're gonna embed in. At the database layer, Amazon Redshift is a clear right choice 'cause this is a data warehouse-type application. We wanna do it in the cloud, Redshift has really emerged as a great database and the clear leader there. In terms of the economics, we won't get into the specifics there, but I think, you know, we're not gonna see very material cost of goods sold on Veeva Nitro, I would say less than what we'd see cost of goods sold on our CRM product. We'll see how that plays out over time.
Okay, that's helpful. I guess kind of following up on that, can you give us a sense for, you know, how the integration between Nitro and, you know, Vault and Commercial Cloud solutions, you know, might look like at, you know, once a product's scaled out?
In terms of the integration, that'll be a key part of the value proposition. Between, for example, Nitro is focused on the commercial area, so the key integrations with a couple of our key products are Veeva CRM and the Vault PromoMats. We'll build that integration in a very seamless way so that customers won't have to build it, won't have to maintain it, and that's a pretty complex integration. You're right to point out these integrations are a core part of the value prop, and that's a core part of the value we're delivering.
Okay, got it. That's helpful. Maybe if I can just sneak in a housekeeping question for Tim. When you talk about your calculated billings expectation for the next quarter and following year, that is including the new definition of calculated billings with unbilled accounts receivable, correct?
That's correct, Rishi.
Okay, great. Thanks, guys.
Your next question comes from the line of Pat Walravens from JMP Securities. Your line is open.
Great. Thank you, and congratulations. Just following up on Nitro, can you talk a little bit, Peter, about what the most common use cases would be? I mean, is it things like, you know, pairwise correlations between genes and specific diseases, or is it things like sales force productivity?
The common use cases are sales force productivity, marketing productivity, which types of content are being the most effective, predicting in some ways, sales forecasting. When we look in the AI use cases, that's about, for example, at the specific sales rep or the specific sales manager level, what to do in the next week, some suggestions about what to do, also maybe what not to do in the next week. Those are the most common use cases.
Okay, thank you. Why start in Japan?
For Japan, Matt, do you wanna take that one?
Sure. Yeah. Japan, it has some specific market dynamics that are different from anywhere else in the world. Specifically, the distributors actually send daily sales data that has to get all the way out to the sales reps. We had customers for the last few years really pushing us to help them to solve that problem. Just seemed like a ripe opportunity to get started in the data warehousing space there, but with a use case that's slightly different than what we'll see in the rest of the world.
Okay. Thank you.
Your next question comes from the line of Brad Sills from Bank of America Merrill Lynch. Your line is open.
Oh, hey, guys. Great. Thanks for taking my question. just wanted to ask about the top five, you know, RIM deal. Obviously, you're seeing real traction at that end of the market with regulatory. you know, what's your expectation for clinical? would you see some potential, you know, validation in regulatory for, you know, clinical in some of these top, you know, 20 accounts?
Sure. Hey, Brad, it's Matt. Yeah, it was a big deal that we celebrated that first big go live in RIM. Clearly, there's connections between all of the different areas within Development Cloud. At a lot of our big RIM customers, they actually started with clinical, and that influenced their appetite for doing something in RIM and for quality. In the one that we just referenced, this one that just went live, actually their first Vault Development Cloud application was RIM. We're hopeful that over time, that will influence the clinical and quality area. For sure, we see that influence across the industry with large and small companies. There, there have been some patterns in the order in which companies approach it, but it really just depends upon where their business needs start.
What we've seen consistently, though, no matter where they've started, is that the ability for us to cross-sell the next solution is really aided by a successful implementation of the first one, not unlike what we've seen in other parts of our business.
Great. Thanks, Matt. Then maybe one on safety. I know it's early, but if you could provide any color on, you know, where you're seeing, you know, early interest, maybe some low-hanging fruit in the pipeline, just opportunity for safety. Thanks so much.
Actually, your first question is a good lead-in into the safety one because safety systems have to be integrated to quality systems, clinical systems, and regulatory systems. The more companies have adopted the Development Cloud, the more likely they are to look at safety as a logical next step. What we've learned in the last 90 days was basically more confirmation that we're on the right track. We've been engaging with dozens of companies that are getting more and more excited for the arrival of that product later this year.
Great. Thank you so much, Matt.
Your next question comes from the line of Kirk Materne from Evercore ISI. Your line is open.
Hey, guys. Thanks for taking my question. This is Daniel Greenfield on for Kirk. Just wanted to touch base on the partner channel again. I mean, do you guys feel like, you know, as your portfolio broadens, you're gonna need to, you know, expand on that more? I guess just talk about the evolution of that ecosystem as you guys become a more strategic platform vendor. Thanks.
Hey, Daniel. I would say if we look at it through two lenses, one is the very large systems integrators. I think the broader product portfolio is making us a more and more important part of their go-to-market strategy and their revenue growth. Large SIs are getting more interested in working with Veeva and our customers as we have a broader portfolio of solutions to bring. On the smaller sort of niche partner side, each time we go into a new space, there's a whole collection of companies that have specialized just there. And safety is a great example. There's a big ecosystem of safety-specific companies that we never spoke to that now we're starting to talk to. I think we'll see similar things around data warehousing and AI as that evolves over time as well.
The partner channel is basically as important as it's always been, and we're able to replicate a lot of the way that we work with them when we go into new areas.
Great. That's helpful. Thanks.
Your next question comes from the line of Scott Berg from Needham. Your line is open.
Hi, everyone. Thanks for taking my questions here. I guess I've got, well, just one quick one. Tim, you had kinda reiterated the company's expectations to continue growing subscription revenues at a 20% + rate through 2020. Just wanted to see how you guys are thinking about that from a, maybe a product contribution standpoint now that we're six months farther into discussing those goals. We know Vault's gonna be the major driver there, at least, generically of that growth during that timeframe. You know, new products like Nitro, how much do they factor into helping drive those goals?
I think if you think about, Scott, the new products like Nitro, we will approach the go-to-market similarly to other new products that you've heard us announce and bring to market over time, which is we start with the early adopters, and we spend a bit of time there, you know, maybe the course of one to two years, to really make sure that those early adopters are being incredibly successful before we move into the reference selling model, and then revenue will scale out from there. Specifically, Nitro, doesn't really materially contribute to that time period that you're talking about. It will contribute more to the post-2020 timeframe.
Got it. Very helpful. Thanks for taking my question.
Your next question comes from the line of Sterling Auty from JPMorgan. Your line is open.
Yeah, thanks. Hi, guys. Just along the Nitro question line, I missed it if you said it, but how should we think about what the total adjustable market for the solution would be? What are the technologies that it would actually be replacing, from what companies?
Sure. Hey, Sterling. Glad you were able to make it to the call. Data warehousing is a big and valuable space for life sciences companies. In the commercial space, it's one of the largest areas of spend. When we look at the market for Nitro specifically, we look at it as similarly sized to the base CRM market. In terms of what we replace, there is no single vendor that is the leader there. It's a collection of companies that have outsourced data warehouses that are built on a number of different technologies. There's still some old Teradata or Netezza appliances and databases out there. There's never been an application.
There's never been a cloud application where on the first day of the data warehousing project, the data warehouse done, and all of the Veeva CRM and all of the Vault PromoMats data is already in it. The project is to add other third-party data sources and to build the BI layer with familiar tools like Tableau and Qlik. We're not replacing anything that looks like Nitro, but the job that Nitro will do has been done by a collection of different kinda custom-built and cobbled together systems over the last few decades.
Great. Thank you.
Your next question comes from the line of David Hynes from Canaccord. Your line is open.
Hey. Thanks, guys. Just two related questions tied to the CRM, the core product. Curious update on kind of the add-on pipeline. I mean, it seems like most of the innovation we're hearing you guys talk about is, you know, involved in new markets and now the data warehouse. Curious, is there still a focus on the add-on pipeline? What should we expect to come? The second part of that question is, you know, how do you think about pricing as a lever to growth for the core CRM? Thanks.
Sure. I'll take the second question first. I really like looking customers in the eye and telling them that we have never raised their price.
Yeah.
Companies that bought Veeva CRM 11 years ago pay the exact same price, and we hope to be able to do that into the future. We do not plan to use any kind of pricing power to grow the company. In terms of the add-on pipeline, I'm not sure. Are you asking about the add-on products we have today that we haven't talked a whole lot about? Are you asking about other potential products in addition to
I was more asking not necessarily what's to come, but should we expect there to be the introduction of, you know, additional add-ons? I mean, it was a pretty powerful lever to driving. I think you've talked in the past around, you know, 15%-20% uplift on CRM pricing for every incremental add-on. We haven't had many incremental add-ons released lately, so curious how you're thinking about that as fiscal 2019 plays out.
Yeah. Through this year, I think the focus is gonna be on some of the ones that we still consider to be brand new, Engage Meeting and Engage Webinar. Engage Webinar combined with the Events Management module is really quite powerful, and we're just at the very, very beginning of that. Since we're talking about add-ons, I think it's a good distinction that let's not think about Nitro as an add-on. Right? Nitro is a market similarly sized to CRM. We'll talk about CRM and CRM add-ons in the similar way that we have been, and when we talk about Nitro, it's gonna be with a little bit of a different narrative.
Yep. Okay. Makes sense. Thanks, guys.
Your next question comes from the line of Bhavan Suri from William Blair. Your line is open.
Hey, guys. Thanks for taking my question. Brad, I guess this is that Takeda Shire merger.
Bhavan, I'm sure the transcript won't get it, but I think I got the question. You're asking about the Takeda Shire merger.
Correct. Yeah. The effect of Veeva.
Yeah, we got it. We've always said on these calls the high volume of mergers and acquisitions in this industry have been neutral to positive for Veeva and couched that a mega merger would be negative. Now, the Takeda Shire merger would be the largest one that we've seen since starting the company. The two companies don't operate in a large number of overlapping therapeutic areas. It's just a couple. They're unlikely to stop any clinical programs and unlikely to have large layoffs in the sales force. From a financial perspective, the future impact would be maybe a slight headwind, but it would not be a material change, even though it is such a large merger.
I would say more importantly, we have a strong partnership with both of those companies, and we're gonna work closely with them through this merger to make sure that it even gets stronger as a result.
Got it. It's helpful. Thanks. Then I'll just ask a quick one on the CRO initiative. Sort of, you know, you've been targeting those guys. Just love to get some color on where you are, any progress you've made, and sort of how you've seen sort of any successful sort of engagements with those guys. I know I think Parexel may have been a RIM and Submissions customer. I forget exactly, but I was wondering if you had any updates to that business.
CRO business continues to go well. I won't give any comments on any particular customer, but the general dynamic that's going on, the CROs, they have to serve the life sciences industry. They serve the very large life sciences customers. They serve all the way down to the very small. They have to be aware of their needs and what they're doing. The CROs will see and are seeing our broadening footprint that is serving many different parts of life sciences, especially on the R&D side. We're getting We, Veeva, are getting more strategic with their customers, that's one thing they think about. The second thing is that our footprint that we can sell into CROs is continually getting broader, especially as EDC moves forward and when it moves out of the early adopter stage.
While I don't have anything specific to report, certainly our momentum and our pipeline is doing well, and we have a specialized team focusing on CRO. I'm quite confident with that business over the long term.
Great. Thanks for taking my questions, guys.
Thank you.
Your next question comes from the line of Brian Peterson from Raymond James. Your line is open. Your next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is open.
Hey, guys. Thank you for taking my question. A couple of quick ones from me. First one, just going back to Nitro. How does the product fit in with the, you know, your existing data products, right? Like Network and everything else that you have on the data side, 'cause that seems like a very natural extension. How is, rather, Nitro going to price? I have a quick follow-up for Tim.
In terms of Nitro and how it relates to Network and Open Data, Nitro is not dependent on Network or Open Data, so Nitro will work whether the customer uses our Network product or whether the customer uses a competitive product or whether the customer uses Open Data or they use a competitive product. There is a requirement for Nitro that you have to be using Veeva CRM because that's where the core of all the activity data comes from, et cetera. That's the lay of the land there. We wanna be very open in the Nitro layer. There's, you know, a large part of the industry uses Veeva CRM, and it wouldn't be practical to build Nitro and try to figure out the data mapping with a non-Veeva CRM system.
In terms of the pricing for the Nitro, was there a specific question there?
As in, is it gonna be per user pricing or is it gonna be based on volume of data?
Yeah. For the specific pricing that way, that's something we'll work out with our early adopters and usually we don't discuss that at this time. You know, we're looking at a variety of options and I'm sure we'll settle on the right things for the customers.
Okay. Perfect. A quick follow-up for Tim on billings. Could you maybe help us quantify how much of the beat in billings in this quarter was from pro services and if there was any FX impact on billings, calculated billings in the quarter? Thank you. That's it for me.
Sure, Stan. No FX impact on billings for the quarter. In terms of the percent of the beat that was in pro service outperformance, it was about half. About 50% of that billings beat this quarter came from pro services.
Duration was probably, you know, a quarter or so?
Duration was the next largest Stan, I'm sorry. Finish your question.
Yeah, yeah. No, no, just wanting to get the breakdown of the rest, the other 50%.
Yeah. The other 50%, I would say 2/3 of it was duration and the other third was better than expected bookings.
Okay. Perfect. Thank you, guys.
Your next question comes from the line of Tom Roderick from Stifel. Your line is open.
Hi. It's actually Parker Lane for Tom. Thanks for taking my question. You alluded to some nice growth in the QualityOne customer base this quarter. I was wondering if you could go back, though, and discuss the expansion you've seen with some of your early adopters there and whether or not you've learned anything, from those customers as far as product expansion and the product roadmap is concerned. Thanks.
I'm sorry. Can you repeat that specific question? I couldn't catch the first part of it and I wanna be accurate on it.
I was just mentioning that you have some nice sizable customers outside of life sciences, and I'm wondering, in your discussions with them, being that this is a new market, have there been any new product areas that you consider that are sort of adjacent to the QualityOne market that you could address over time?
Yeah. We are having good success with QualityOne outside of life sciences and in some large customers, particularly in the CPG and the chemicals area. When we do that, we always get exposed to different product opportunities. When a customer starts working with our platform, "Hey, we're working with you here at Veeva, we have a need over on this side or over on that side," something adjacent. That's really been going on for the past year or so. We haven't locked in on any new product area that we're ready to talk about, but there's certainly a lot of adjacent opportunity and the trick is to really figure out when to jump into one of those and which one to jump into. We're not ready to talk about any specifics there just yet.
Got it. On the clinical front, you also referenced some nice customer wins in EDC and in CTMS. It looks like you're doing pretty well there. Can you tell us what the appetite is for a full clinical suite that you're seeing in the market and what sort of momentum you've had in replacing some of the existing competitors out there that have been deeply embedded in this market for some time? Thanks.
Thanks, Parker. Yeah, we were definitely seeing an increased appetite for going all in with clinical. The really logical ones are eTMF, Study Startup, and CTMS. Those tend to go together. It's similar people, similar budgets, and very tight integration between the different pieces. There's lots of examples of companies expanding. In fact, one specific example is I think almost every CTMS customer is an eTMF customer also. All of the Study Startup customers are eTMF customers. Those things go together, and I think that as the CTMS product matures, You know, when that is as mature as the eTMF and Study Startup, you know, that is a integrated suite that's never been possible before.
I think EDC, we still see a lot of connections, and sometimes it's the same people, sometimes it's different people, but people see it as their clinical IT landscape, and they understand that one platform is better than two or three or five. Competitively, we see the same companies that we always saw in each of these areas. Some are strong in eTMF, some are strong in EDC, some are strong in CTMS. We don't have a competitor that is strong in all of them. Not only do we try to have an integrated suite, but we also are trying to create the very best product in each one of those areas. We see a lot of momentum across clinical, U.S., Europe, and building in Japan as well.
Makes sense. Thank you, guys.
Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.
Thanks, guys, and sorry about that. Apparently, this telephone is bamboozling me here. I wanted to hit on eTMF. You know, it hasn't really come up yet, but I think you mentioned that this was the second-best quarter ever for eTMF. I just wanna be clear, is that a new business dynamic or is that revenue? Maybe expand a little bit on what drove that.
Thanks, Brian. By the way, congratulations, that's the first time we've heard the word bamboozle on our earnings call, that's pretty good. Well, now to the more serious question of eTMF. You know, the dynamics there is the market's relatively big. You know, this is something eTMF, even though we've been in this market for quite a while, and we have a lot of customers, there are large customers. It goes all the way down to quite small customers. There are pharma, biotech, med device, CRO customers. They all need eTMF.
Some of these implementations are long, so it's something sometimes a deal that we have, entered into, you know, maybe two years ago, there's still some revenue increase now as a customer would complete the rollout of an enterprise license agreement, or maybe they would just add incrementally more studies. There's really no change in the dynamics. It's just to point out that this is, this is a really large market, and it plays out over multiple years and over multiple geographies and customer segments.
Got it. Thanks for that. Maybe one for Tim. Just, you know, you kinda outlined the early adopter phase that you have with Nitro and how that's gonna play out over the next few years. You know, we have a lot of products that are in this early adopter phase now. When should we think about those transitioning out of that phase? Is there any particular time period that we should really see some accelerated sales and marketing investments? Thanks, guys.
Yeah, it's a good question, Brian, in that we have announced a number of new products over the last 18 months, and they're in that early adopter stage. In the case of Nitro, as you mentioned specifically, you know, we have it in Japan generally available, and it will be later on this year that it'll be in the U.S., so the early adopter stage is in front of us. I think as we look to the subscription revenue guidance that we gave through 2020, the vast majority of where that is coming from was from the core products in Vault and in the Commercial Cloud, that we had up until that time period. We will see some contribution from some of the newer initiatives like QMS, like outside life sciences.
I think those will really start to contribute materially to revenue after that 2020 timeframe, is what I would say. Again, short strokes, there will be some contribution in revenue between now and 2020 with more of the material revenue contribution, outside, you know, past that timeframe.
Understood. Thanks, Tim.
Your next question comes from the line of Ben Rose from Battle Road Research.
Good afternoon. I have a couple of questions. First for Tim. I think this is the first time we've seen the unbilled receivables account on the balance sheet and was curious to know if this is traceable to a particular customer or product set and whether we should expect to see the existence of this account going forward.
Yeah, Ben, the real driver here is the, with the adoption of ASC 606 and the way that we are treating the revenue recognition of some of our multi-year arrangements. We have identified that account to articulate what the impact is from those particular accounts and how we are accelerating revenue in front of billings in some cases. Now, what you'll see over time, Ben, just a little bit more detail there. Typically, that account was within accounts receivable, and what that account would have had as a sub-account was we bill services revenue after we take the revenue. When we take a month of revenue, like, let's say, April, we will take the revenue in Q1, but we'll bill it in Q2. That also is part of the unbilled receivables that you'll see going forward.
A month of services billing and revenue.
Okay, that's helpful. For Peter, with regard to Nitro, is it logical to assume that your product roadmap would include the application of Nitro to various parts of the Development Cloud?
Yeah. Well, at this time we're focusing Nitro in the commercial area, Nitro and then we'll follow that on with an AI engine over time targeted to late 2019, late next year. That's our focus right now. That type of technology is very applicable to the Veeva Development Cloud, but we've made no commitment to do that at this time. We're gonna really focus on our early adopter success and getting the technology right. Type of a data warehouse application for the Veeva Development Cloud, that's something we'll always be evaluating, but we've made no decisions on that at this time.
Okay. Thank you very much.
Thank you.
There are no further questions at this time. I will turn the call back over to Mr. Peter Gassner for closing remarks.
Thanks for your time today, everyone, and thanks again to the Veeva team. We appreciate all the outstanding work, execution, and focus on product excellence that allows us to deliver for our customers. Have a great evening everyone. Thank you.
This concludes today's conference call. You may now disconnect.