Ladies and gentlemen, thank you for standing by, and welcome to the Veeva Systems 4th Quarter and Full Fiscal Year 2021 Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over your speaker today, Mr. Ado Garrett, Senior Director, Investor Relations.
Please go ahead.
Good afternoon, and welcome to Veeva's fiscal 2021 4th quarter and full year earnings call for the quarter year ended January 31, 2021. With me on today's call are Peter Gassner, our Chief Executive Officer Paul Scialla, EVP Strategy and Brent Bowman, our Chief Financial Officer. During the course of this conference call, we will make forward looking statements regarding trends, our strategies and anticipated performance of the business. These forward looking statements will be based on management's current views and expectations and are subject to various Our actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most Filing on Form 10 Q, which is available on the company's website at www.vivo.com under the Investors section and on the SEC's website at www.sec.gov.
Forward looking statements made during the call are being made as of today, March 2, 2021, based on the facts available to us today. If this call is replayed or viewed as of 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 during the quarter unless we do so in a public forum. The guidance we will provide today is in part based on our current assumptions as to the macroeconomic environment in which we will be operating 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 and in the supplemental investor presentation, both of which are available on our website. A reconciliation can also be found as an exhibit to Form 8 ks filed with the SEC adjusted for this call. With that, thank you for joining us, and I'll turn it over to Peter. Thank you, Athol.
First, I'd like to thank our life sciences customers for their incredible efforts over the last year. The COVID-nineteen genome was only sequenced about a year ago, and we now already have safe and effective vaccines, diagnostics and therapies. That's just amazing speed. COVID-nineteen was also disruptive to the healthcare systems overall and the industry really stepped up to support doctors and patients around the world. 2020 was a transformational year for life sciences and for Veeva.
The scale and speed of innovation from the Veeva team enabled the industry to adapt quickly and work in new ways. Thanks to the team for your outstanding execution against our important mission. Turning to our results. EVA delivered exceptional performance for the quarter year. Total revenue was $397,000,000 up 27% year over year.
Subscription revenue also grew 27% year over year and non GAAP operating margin was 39%. Our full fiscal year revenue was $1,460,000,000 up 33% year over year and subscription revenue was 1,180,000,000 up 32% year over year. In commercial, we further extended our leadership position with commercial cloud customer growth and the development of important new products that will set us up for future growth over the long term. In Q4, we had 17 new as customers move to paid subscriptions at the end of the 2023 period. We are pleased with the adoption of Engage and expect high attach rates with new customers as I look to digital capabilities to drive field efficiency.
I'm also very pleased with the progress in Veeva Data Cloud. So previewing our data with other customers and the feedback is encouraging. In multiple cases, we are able to identify patients and prescribers that were not available in their existing data sets. Looking ahead, we expect to have prescriber and sales data available for the U. S.
By the end of the year. Offerings for additional countries will come over time. It's early days, but we're excited by the potential of Veeva Data Cloud help the industry in an area that's been stagnant for too long. Having great data, software and business consulting is allowing us to build deeper partnerships with the industry. We're starting to see increasing interest among biotechs to go all in with Veeva, Partnering with us from the very start to define and operationalize a digital first commercial strategy.
In Q4, we had a second biotech in the U. S. Go all in with us in this way. To put the breadth of our full offering in context, Core CRM is roughly 20% of the opportunity when a customer goes all in with commercial cloud in the U. S.
There is a major long term potential for Veeva in commercial if we execute well on our vision. This year, our focus is As we look back on the year, I'd also like to share that the 2 acquisitions we made about 18 months ago, Crossix and Physicians World, Our integrated and operating well. We further invested in CrossX, growing the team by more than 50% since acquisition. The growth is mostly in the data science area as we expand the Crossix data platform. Our event services business that was Physicians World Made a quick pivot when the pandemic hit and has been helping lead the industry in digital events.
We expect these new businesses to continue to thrive, growing roughly in line with Veeva overall in the year ahead. On the R and D side, we had another great cloud to streamline drug development end to end. We closed the year with more than 850 Vault customers overall. Quality and regulatory had a record number of wins in the year. The Vault RIM and Vault Quality Suites are adding significant value to the industry as they are the only offerings That can truly unify these important functions.
It was also a big year for clinical. One major milestone was involved In 2016, we set out to build a better EDC, the first product in CDMS, and we believe we are now there. Vault EDC allows customers to build and execute studies more quickly than before and get access to crucial trial data faster. The impact on our customers' trial speed and agility has been significant and the industry is starting to take notice. In fact, we just announced that 6 of the top 7 CROs have joined the Vault CDMS partner program, which is further validation of the Having a critical mass of CRO partners will make it easier for smaller customers to use Vault CDMS because they often leverage the technology provided by their CRO partner.
We've also made excellent progress with VIVA clinical network at 25% less cost. It's still early days for clinical network, but we have the key building blocks in place. We have 7 customers signed up and the first few customers just went live with their first sites on SITE Connect, which is our first clinical network application. SITE Connect links sponsors and the clinical research sites together to make study startup and study execution faster and more compliant. My VIVA for patients is another important part of the clinical network.
The first application in My VIVA for patients is eConsent We're already working with a few early adopters. In fact, we had our very first patient use My Viva to sign an electronic consent form last Friday. That's a big milestone for clinical network. We're really excited about having patients use Veeva applications directly. Overall, it's been great to see so much progress, innovation and exceptional execution across the board in commercial and R and D.
Looking outside of life sciences, we had another solid quarter with new customer wins and expansions in consumer goods and chemicals. In Q4, a top 20 nutrition company selected Regulatory 1. Despite COVID related disruption and a significant downturn in the Before we close, I wanted to share that in February, EVA officially became a public benefit corporation. Our proposal passed by an overwhelming majority vote. Thank you to our shareholders for your support in this important vision.
This move was about the future of Veeva over the decades to come and ensuring the company continues to operate in consideration of all stakeholders, but we are also seeing a positive effect right now in attracting talent to Veeva and in deepening our customer relationships. I also posted a medium article with my personal perspective on the importance of We're in a stronger position than ever with the right team, customers, products and vision to fuel our growth to 2025 and beyond. I'll now turn it over to Brent to discuss the details of our financial performance.
Thanks, Peter. The Q4 was a great close to another year of outstanding execution for Veeva. We had record bookings in the quarter, driven by our continued momentum across our Development Cloud product suites and Veeva CRM Engage. Development Cloud performed extremely well with a record bookings quarter, including particular strength in CTMS and QMS. In commercial cloud, core CRM and add on Engage subscription revenue growth after fiscal year 'twenty two will be similar to other CRM add ons.
Crossix had a strong bookings quarter and posted $79,000,000 in subscription revenue for the year. Total revenue for caustic and Physicians World was $103,000,000 with Physicians World benefiting from growth in virtual events in the 2nd half of the year. These acquired businesses are fully integrated into our financial results and we will not break them out in the future. Strong subscription bookings including Engage strength and services demand led to calculated billings of 688,000,000 which was $48,000,000 above guidance. Total billings includes $15,000,000 from changes in billing terms At a few large customers, which was $5,000,000 above our previous expectation for Q4, our revenue retention rate for the year was 124%.
This metric is defined in the earnings release and reflects annualized subscription revenue growth within existing customers, Net of revenue attrition continues to illustrate the increasing value we are providing to our customers and the industries we serve. We had another strong quarter of hiring. We ended the quarter with 4,506 employees, a net gain of 202 from the previous quarter. For the year, we added more than 1,000 net new employees, the vast majority of which were in our field and product development teams. 4th quarter operating margin was 38.6 percent, which exceeded guidance.
Operating margin was driven by subscription revenue outperformance and a smaller than expected seasonal dip in our professional services business. As a reminder, our operating margin includes roughly a 2 50 basis point benefit from cost savings related to lower travel and event expenses, which was in line with the previous quarter. Operating cash flow for fiscal year 2021, excluding the excess tax benefit was 471,000,000 which was below our guidance. Approximately $30,000,000 of expected Q4 collections pushed to Q1 and were collected in the quarter. I'll now provide guidance for the Q1 fiscal year 'twenty two.
For Q1, we expect total revenue between 408 and $410,000,000 with subscription revenue of roughly $330,000,000 We expect non GAAP operating income for the Q1 between 157 and $159,000,000 This includes a benefit from reduced travel and events similar to the past three quarters. Note that we have made some changes to our fiscal year 'twenty two sales compensation plan as we do from time to time. These changes will result in approximately $3,000,000 expense in Q1 and approximately $11,000,000 for the full year. Q1 non GAAP EPS is projected to be 0.77 to $0.78 based on a diluted share count of approximately 162,000,000. Please note that we are maintaining our non GAAP tax rate at 21% for fiscal year 2022 and we'll monitor this assumption for significant events including any relevant tax law changes.
We expect calculated billings of roughly $392,000,000 in Q1, which implies year over year growth of about 17%. This reflects approximately $4,000,000 of billings that moved into Q4 from Q1 related to the changes in billing terms we mentioned earlier. If we account for this dynamic, our normalized Q1 billings growth would be closer to 19%. Please remember that there are numerous factors that make year over year comparisons of this metric highly variable on a quarterly basis. Therefore, we do not believe quarterly billings growth 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 year are better indicators of our momentum. Turning to our guidance for the full fiscal year We expect total revenue of $1,755,000,000 to 1,765,000,000 a $45,000,000 increase to the high end of our prior guidance. We expect subscription revenue of approximately 1,430,000,000 consisting of Vault subscription revenue of roughly $750,000,000 and commercial cloud of roughly 680,000,000 We expect non GAAP operating income of about $655,000,000 Investing for growth is a priority for the year. Our guidance reflects investments with new data suppliers for our data cloud products and additional hiring primarily in our field and product development teams. We expect travel and event related expenses to start to increase in the back half
of the
year. We expect calculated billings of approximately $1,870,000,000 which reflects a 17% year over year growth rate. If we adjust for changes in customer billing terms in fiscal year 2021, which totaled approximately $17,000,000 Our guidance would imply normalized billings growth of roughly 18%. We expect about 42% of full year billings to be in Q4. We expect non GAAP EPS for the full year of approximately $3.20 based on a fully diluted share count of approximately $163,000,000 Finally, we expect full year cash flow from operations excluding the excess tax benefit of about $635,000,000 In closing, I'm very happy with our strong momentum exiting the Q4 and the growth we expect in the coming year.
We are well positioned to achieve our 2025 target of $3,000,000,000 in revenue. Thanks for joining us today. And now I'll turn it over to the operator for questions.
Thank you. Your first question will be from Ken Wong of Guggenheim. Please go ahead.
Great. Thanks for taking my question and fantastic quarter guys. This one is for you, Peter. So can you maybe give us a little bit of feedback From what you're hearing from customers on this transition to a PBC and then perhaps more importantly, you've been pretty public with your call to arms for Other industry leaders to follow your lead, what kind of feedback are you getting from other executives within life sciences and perhaps even outside On this potential change to a public benefit corporation?
Ken, thanks. Excellent question. For customers, it's helping. It's a discussion starter and it also is a very Concrete way to say what Veeva is all about, not just because we're saying it, because we wrote it in our charter that we're committed to the industry, To society and to our employees, not just to our shareholders, so they can depend on Veeva long term and it's absolutely helping. Also helping in recruiting, we have people a number of people seeking us out and they want to be part of that.
So I would say there is an unexpected also thing that's happening. I think it's helping us generate new ideas. It's posing us to a different ecosystem of ideas that will be positive for Veeva in the long term. In terms of other companies, certainly have had reach out from others and Interested in it. I think rightfully so, this is a Board decision, a PBC matter.
So this is something that plays out Over years, really, this is not a snap decision. And it may be right for other companies to be PBCs and it may not be right for them. I try to stay neutral on that and just provide whatever advice and guidance I can about how it fits for Veeva.
Got it. Fantastic. Thanks for the color there. And if it makes you feel better, we've been hearing it from investors that it's positive and also have had other companies that we follow And then just So the follow-up is for Brent. Just wanted to touch on the commercial cloud growth.
I think you called out $680,000,000 It looks like that's Can you maybe walk us through some of the assumptions that are in there? And is there any seasonality we should be aware of to the And that there are going to be some reductions in sales reps and how that might feather into outlook?
So why don't I take the first part about the headcount reductions and then I'll let Brent answer the question about billings and impact On the financials, so from a headcount perspective, we first talked about that last quarter. So we know a little bit more now. We said we believed it was about a 10% reduction that will happen about over the next year or so. We still think that's going to happen. We think it will Happen likely over the next 1 to 2 years.
But so far, we haven't seen the reductions happen broadly across the industry. It haven't been industry wide reductions We've seen in Q4. There's always ups and downs, just a little bit up and a little bit down as companies shift, but there has not yet been That's been unusual or out of the ordinary. Now having said that, why do we still believe it's going to happen? The context is important here.
The industry has moved to digital. We have we helped the industry become more digital. You heard that in Brent's prepared remarks where we have now About 60% of market share from an Engage standpoint, the industry is using that. That will make the industry more efficient. It will make them more effective and productive.
They now have the opportunity to apply those efficiency gains to either reach more customers or to have reductions in the field force. And I think pharma Is thinking about what's how do they optimize for that and that takes time. So we haven't seen the impact yet, But I do think that will play out and we have included those reductions in that thinking within our guidance as well.
Yes, and maybe I could add then. In the 13% growth that we guided to it, we did see broad strength Across the portfolio. So, cross 6, core CRM and core CRM add ons. We did have a pop in Engage. So that's probably the one item that would it flowed through our Q4 billings and you'll see that flow through revenue through fiscal year 'twenty two.
And then beyond that, we expect Engage to grow more in line with other traditional add ons.
Great. Thanks for color, guys.
Your next question will come from the line of Brian Peterson of Raymond James. Please go ahead.
Yes. Thanks for taking the question. I kind of wanted to follow-up on that just to clarify. So Engage, how do you think about the long term penetration potential? I think I just heard 60% market share.
Is that Potentials, I think I just heard 60% market share. Is that of the total reps? Is that penetration? I just want to make sure I understand The stats that you're giving and maybe what is the longer term kind of penetration potential that you see of that
Yes. So you're right. It's the 60% is the of the total Engage opportunity. So as we think it's not as a percentage of the CRM seats that we have, it's of the total market for Engage. So that happened relatively quickly over the course of the last year.
We were there for the industry with the right products and technology and expertise to move the industry quickly. We'll see that impact Hit our revenue, as Brent mentioned, largely this fiscal year. And then beyond that, we'll see it grow more like A steady growing add on. So most of the pop that we have seen has already hit in this current year. And then beyond that, I think it will see steady growth.
And it may approach somewhat similar attach rate to what we've talked about with close to marketing and with approved email, which are a bit higher than
where we're at with 60 Okay. Thanks for the clarification. And I just wanted to hit on the 17 new wins for the core CRM. Obviously, you guys have a pretty significant market share leadership position there. I'd just be curious if you had to take a step back And think about the results for the core CRM this year, how did that perform versus your expectations?
And any thoughts on competitive dynamics in that space? Thank you.
Yes, thanks. I can cover that also. So yes, you're right. I mean, last quarter, we had 19 CRM wins. That was a record.
This quarter, we had 17 CRM wins. As we look across those, there are many of them are pre commercial companies, a lot of them in the U. S. Market. We are also seeing wins in Europe, but then even in some of the domestic markets like in Brazil and in Japan.
So we're pleased with that. We're winning most deals. In terms of the overall competitive landscape, we're gaining share. We've gained share quarter over quarter. We've gained share year over year.
And there's a reason for that. The reason we're gaining share is because Potentially in really difficult times like we're operating in, companies are looking for a partner they can trust. They want a partner that can execute. This is all about execution, right? You have field people that need to be productive in the field.
They need a partner that they can trust. They also want a partner that can innovate with them, and we've proven that. And they're also looking for somebody who has the domain expertise and the guidance to get them through to digital transformation. And that's what we've been doing over the last year. So From a competitive standpoint, our position has actually improved over the last year because it's really shined a light on the difference between how Veeva is operating and how rest of the others other alternatives in the market appear.
So really
Your next question will come from Brad Sills of Bank of America. Please go ahead.
Great. Thanks guys so much for taking the question Congratulations on a nice finish to the year. I wanted to ask about the comments made earlier, Peter, on core CRM, only 20 That perhaps are further out when you think about getting to 100% over time. Near term, obviously, Engage is doing well. There's still some wins You're executing on new customer wins, but we look further out maybe 2, 3 years from now, maybe something that's on the
Products that we have today in the U. S. Market, when we sell that to a small biotech, when they go all in with us, Some of it is from the commercial content. There's a pretty good sized chunk from data cloud and that chunk will grow. The cross X is a sizable area that will grow.
And then we have the CRM add ons and we also have Nitro. So when we look For this complete commercial, which we have today in certain markets like in the U. S, now it's very early days, but we haven't. That's where the opportunity comes from. So we've come a really long way from the days where we just had CRM.
Now we have a long tail with the data and analytics products being the largest areas.
That's great. Thanks, Peter. And then one more, if I may, please, Just on the outside life sciences opportunity, dollars 30,000,000 of revenue is a nice milestone here. Where are you today? I know that you haven't really been investing aggressively kind of letting the product sell itself and at some point Perhaps getting more aggressively investing in that business to go after the opportunity.
I guess, where are you in that reference selling approach in some of these industries that you're going after with consumers, consumer packaged goods, chemicals, etcetera?
Yes. Outside of Life Sciences, we're focused on the consumer packaged goods, chemicals and also cosmetics, although cosmetics has Tough year here with the pandemic. And in that, we're focused on the quality and the regulatory areas. So the market is of a certain size to put it in reference, it's about similar to our CDMS market size. And it's what I would consider just relatively slow and steady mover.
So we're deepening These are areas that don't move too fast. So to give the guidance on that, we have said before, we would like to Have about $100,000,000 business there in that segment of the market by 2025 and we're still on track for that. So things are going According to plan, they're outside of life sciences.
Great. Thanks so much, Peter.
Thank you.
Our next question comes from the line of Tom Roderick of Stifel. Please go ahead.
Great. Hi, everyone. Thanks for taking my questions. Peter, I wanted to go back to your comment On CDMS, I think you said 6 of the top 7 CROs are now partnered with you on that front. And perhaps that's seeding the market more at the lower end or at the emerging startup side, which I'd love to hear a little bit more about.
But just talk a bit, if you don't mind, about how the CROs are kind of building up your presence in the CDMS side And what that does mean for the other top 20s where I know that that would take
a little bit more of
a share shift over time against some of the entrenched competitors, We'd love to hear more about that. Thanks.
Yes. Tom, I consider that very significant. 6 of the top 7 CROs supporting Veeva in our partnership program, every one of the top 7 CROs except for And that's significant because that means that's what customers are asking for. CROs are very efficient. They focus on getting the work done.
They don't want to lead into technology when customers aren't asking for it. So this means the customers are asking for this technology, and it means the Ciro's Feel that they can be very efficient with Veeva. And over time, now that takes a year or 2 to really work its way into the mid market ecosystem, but We're very bullish on that. I expect us to be the leader in the clinical data management market by roughly in the 2025 Timeframe. It's a market that life sciences is cautious on and conservative, but we have a better product and I'm very pleased with our early adopter success with our customers.
So I couldn't be happier. We entered that market in 2016, wrote the first line of code, And now we're set for leadership, so very enthused about that area.
Fantastic. That's great progress. And Brent, not to put too fine a point on it, but I appreciate some of the details on the Engage sort of customer conversion and the success you're When you guide for the commercial cloud for this year, can you directionally just give us some sense as to how much of that acceleration on the organic front It's being driven by Engage and sort of the reason behind asking that is as we model out longer term, trying to think about what a more normalized commercial Growth rate would be once we sort of lap the benefits of monetizing those engaged customers that have been free for the last year?
Yes. And we don't break out specific products in guiding and providing results. But with that, a little Well, texture, as I said in my prepared remarks, we gave you a sense of what we thought the dollar opportunity was that we had captured at 60%. The other piece of the equation is trying to size that. So if you think about sizing it, we talked about percentage of core CRM.
So we see that orienting around about 15%. So if you think about sizing that, that's something to consider there. And the rest of our portfolio had outside of Engage would have a record commercial growth quarter bookings quarter. We did have strength broadly outside of Engage.
Great. Really helpful. Thank you. I will jump back in the queue.
Yes.
Your next question comes Donald Hooker of KeyBanc. Please go ahead.
Great. Good evening. Thank you for the questions here. I
was curious if you had any kind of
Potentially merging, you commented you're excited about your progress partnering and working with CROs for a lot out there for you. Kind of any thoughts on the CRO landscape from Europe or from the Veeva perspective given that merger is out there?
Yes, that's certainly a large merger and there's consolidation that can happen in the CRO space. So I think that's actually going to be good news for us. Both Pierae and Icon are our customers. They have some of our products, but not all of our products. I think as they get together and they look for more efficiency, they'll probably look to Veeva for more of our products.
Now That is a consolidation in the CRO industry, but there's also always specialized smaller CROs starting up in certain areas. So it's always there's both Startups and consolidation happening, so I don't see a macro level change in the CRO industry.
Interesting. Thank you. And then maybe a follow-up question. Just was curious if you could update us on your Veeva business consulting business. I know it's a little bit small and it doesn't get a lot of focus, but I just have A lot of these biopharma sponsors out there, particularly in the clinical area, are struggling with wildly changing Regular environment, the sort of the changing types of therapies coming to market and thinking about how to dovetail that with a lot of the new technologies Companies like Visa are providing, I would imagine that's a nice growth area for you.
Can you maybe talk about that even though it's small? And I think the business consulting is more commercial now, granted, but is there opportunity to expand that into regulatory and clinical?
Yes. It is A relatively small now and it is in commercial. We will bring that into the R and D area this year. And let me step back and talk about what the Purpose of that, it's really business process consulting. Can we help customers optimize the business process?
A lot of time that's related to our products, It may not be always related to our products and that brings a whole bunch of efficiency because as you have new technology available, your processes need to In the clinical side and in the R and D side particularly, what you're going to have is How do they optimize processes across the functional groups, the boundaries between quality and regulatory and clinical operations And clinical data and safety, how do they optimize those boundaries given that new technology is available? Whereas in commercial, what you're doing is optimizing field execution within a region. How do you operate better In France, how do you operate better in the U. S? So it takes a really different flavor.
When we look at Veeva starting out in software, Now we've really grown to lots of different software, but also data and business consulting. And that's I think the complete package. So it's Very significant for Veeva overall.
Thank you.
Your next question will come from the line of Saket Kalia of Barclays. Please go ahead.
Okay, great. Hey, guys. Thanks for taking my questions here. Maybe first for you, Peter. Some interesting commentary around the data Cloud, sounds like it's not only another option to customers, but actually potentially even better data, Better quality data that is.
And so the question is, can you just talk about what enables that potentially better quality of data And sort of broad brush is how you envision the pricing on that offering down the road?
I guess how it's better first of all, we set out with the approach to innovate. The existing Approach to the life sciences data is really 20 years old, really, and it really hasn't innovated. It hasn't had that competitive Push to innovate. So we are taking a different approach to data sourcing. I won't get into the specifics of that, but definitely a different approach The data sourcing and then we're focusing on longitudinal data, longitudinal patient data, longitudinal prescriber data And then our sales data.
So if you look at it historically in the past, The industry has gotten used to the data sets they have, but we're bringing them new data sets with more complete coverage that can be used in better ways. So it's a very detailed work, but what we find is when data analysts get a hold of this data, they Wow, this is the way data should be done. Now it's new and so there's resistance to change. So it's almost like moving from client server
Got it. And Brent, maybe the follow-up for you. I think you mentioned this when you were talking about the guide, but you had touched a little bit on potential some potential Tweaks to sales compensation didn't sound like huge dollars, but curious if you could dig into kind of what those tweaks are kind of High level and just a recap on how that's sort of impacting the expense dollars?
Yes, certainly Saket, happy to. So we're not going to get into the nuances of the comp plan changes, but broadly, we're looking to align our goals and incentives As we do periodically to ensure they're aligned to customer success and the changes we made enhances that alignment. The change did result in any substantial changes to our sales OTEs, but it did result in a higher amount of P and L in the fiscal year based on the accounting treatment. So all in all, we think it's been moving in the right direction to align for customer
Got it. Very helpful. Thanks guys.
Your next question comes from Joe Vruwink of Baird. Please ahead.
Great. Hi, everyone. Peter, I wanted to go back to your comments you made at the beginning about Mybeeva, But more broadly, just the rise in patient centric clinical trials. And I understand it's a development that's How do you think Vault kind of develops or evolves over the next few years? And Is it different or are there certain opportunities that maybe are greater if we're truly embarking on this kind of Yes, it's a different way of clinical practices across the industry?
I don't yes, whether the trials are more decentralized or not won't really affect the core vault Or actually the clinical network. I do think by the way that is the approach that's going to happen in more decentralized clinical trials. But the really where We can really help is more patient centric and more paperless clinical trials. So when you think about what we're trying to do, When the patient when the doctor fills out some data after seeing the patient, whether that's virtual or in their office, We want them to be able to type that data into an electronic form, have that flow right back into the sponsor. That's actually not how it's done today.
There's usually paper in the middle. So what we're doing is with our Sightbald product, providing software to the clinical research about it, I guess, it's the biggest undertaking that Veeva has ever accomplished or we haven't accomplished yet, biggest undertaking we've ever started because we're trying to Automate processes across the patients, the clinical research and the life sciences industry. That's quite an undertaking.
That's great. And if I can ask one follow-up, just more in regards to the near term financial So performance, and specifically the change from kind of the initial outlook on fiscal 2022 last quarter and Other than the update around commercial cloud and what you're seeing specifically for Engage, Are there any other factors that drove the uplift in revenue expectations? Because it is A bit larger of a change than you typically have given between the initial and this quarter's
Well, the good news in my answer is it's broad based. So we've seen good strength in demand and customer adoption across our development cloud suites and as I said before, more broadly in commercial cloud outside of Engage. So it is really a broad Loss of strength that we're seeing that drove the increase in our guide.
I guess that's a It's a slight recognition that we're becoming a more strategic partner as time goes on with our customers and that we feel that It flows through to our business. We've proven ourselves more. We continue to prove ourselves more every quarter and our product footprint Growth is broader and we're bringing in more senior executives into the company so that all those things lead to broad based business improvement.
Thank you very much.
Your next question will come from Sterling Auty of JPMorgan. Please go ahead.
Yes, thanks. Hi, guys. I'm kind of curious if you could give us maybe a bit of a descriptive update on The mix of the Vault revenue and what I mean by that, maybe how much of that total Vault revenue is coming from clinical? I know there's a number of products versus just in pure R and D versus commercial, just all the different areas. How would you kind of split it up and describe the breakdown of Vault revenue today?
Yes. Hi, Sterling, it's Brent. So we don't break down the Vault revenue into major segments or at the product level. I think we've talked about the market opportunities, in regarding the TAM. So we've broken that $6,000,000,000 down and we have a long runway Across all of those segments, across the clinical suite, regulatory safety and quality, there's a lot of in front of us and we're really pleased with the traction we're getting.
Sterling, not to break it down into Specific numbers, but the largest revenue contributors in the Ball families are the commercial content. Now that was the first place we got into. Clinical operations and the quality, those are the 3 largest regulatory is good as well, but not quite as large. It has A longer tail on it. And then the newer ones are the clinical data management and especially the safety.
Those are very, very new. So that's roughly how to think of it.
Great. That's very helpful. And then the one follow-up would be, when you look at the business outside of Life Sciences, when you think about your longer term aspirations there, is it all Expected to be in that kind of safety and quality area or how much of the opportunity might come from other Additional solutions that you might be contemplating?
At this time, when we talk about the $100,000,000 That's really in the quality and regulatory area. That's what we have visibility into now and we're executing on. Of course, there's Always potential that we would they would do other things, but at this time we have no plans. We're not executing On anything other than quality and regulatory outside of life sciences, safety will be used outside of life sciences, but that's very early And that's not none of that is contemplated in the $100,000,000
Great. Thank you so much.
Thanks.
Your next question will come from Bhavan Suri of William Blair. Please go ahead.
Hey, guys. This is Dylan on for Bhavan. I appreciate you taking our questions and we'll echo the congrats on a solid quarter. I guess the first question for me, maybe more It's Peter. Now, this is a couple of quarters in from that initial CRO announcement.
We added another kind of top CRO in CDMS. How should we maybe be thinking of these partnerships as not only drivers of the overall CDS adoption, I think you just kind of mentioned it on another earlier question as well, But the overall opportunity for these sponsors and CROs to expand their adoption across the clinical suite Maybe as broader kind of platform integration becomes more and more of a focal point on the clinical side?
Yes, I think it's right to focus in on that, the 6 of 7 of the top 0s. What it really indicates is, you know, VIVA is becoming The core part of the fabric in the clinical data management area for life sciences is integration with the service partners The CROs is driven by interest from sponsors large and small. So we couldn't be more That's about it, I tell you. And I think we'll innovate also with these CROs, right. When they see our type of technology, it will end up causing Them to change their processes to further optimize and that's something that's going to help the industry overall.
You have to remember that the existing The existing clinical data management products, the foundation of the 2 major players, those foundations were made roughly 20 years ago. And there's still, for example, not even those major players are not true Cloud applications and how to upgrade it automatically, they're not all on the same release. There's a lot of inefficiencies built into the system that we're kind of VIVA, I would say, is a breath of fresh air for the clinical data management area.
Right. No, that's fantastic. That makes a lot of sense, especially within the rest of kind of the clinical suite being integrated as well there. Maybe one more if I may for maybe more for Paul. But just kind of maybe given the uptake and it sounds like you guys are kind of Maybe the Physicians World business with virtual webinars, online events, things like that.
Just wanted to get a sense of maybe how you're positioning This business to take or to capitalize on that opportunity, because I think maybe it was more of a checkbox initially when you acquired them. It seems like there's a growing and when you acquired them 12 or 18 months back? Thank you.
Yes, that's exactly what's happening is, The smaller part of the business when we acquired them and we've quickly pivoted the business since a lot of the physical events have been Pretty much shut down. In some markets, they're still happening. They're not having gone to 0, but they've gone down pretty considerably. And what is growing Very consistently across most markets are now digital events, and they're growing for good reason, not only because of the pandemic, but also beyond that. You think The reach that you can get with a digital event where geography no longer is a barrier, compliance is a little bit easier, the overall Cost and spend on the event is less because it's you're not bringing people together physically and let's say a hotel or a restaurant.
So there are a lot of reasons that the industry has moved to more digital events and we pivoted the business to focus on that. And that has we're already starting to see some of the impact from doing that and I think that will continue over the next couple of years. So When I think about the prospects in the event space, it's actually broadened our portfolio. We can now handle companies that do Physical, that do virtual. And what I think we'll see a mix of in the future is this concept of a hybrid event where they do Some parts are some people are at a physical location and others are joining virtually.
So it's really it's strengthened their overall position in that space.
Okay, great. Thanks guys. Appreciate you taking
the questions and congrats again.
Your next question will come from Rishi Jaluria of of D. A. Davidson. Please go ahead.
Hey, guys. Thanks so much for taking my questions. Nice to see continued strong momentum in the business. Wanted to maybe go back first to the impressive CDMS traction that you're seeing. I was wondering if you could give us a little bit more color, Especially on the CRO traction that you're seeing,
is this
are these mostly Splicing other solutions is a greenfield and then going after kind of a bunch of different point solutions that are stitched together. Any color you can give on where you're seeing that traction and what those customers are using in the 1st place would be helpful. And then I've got a follow-up.
Sorry, I was on mute and you couldn't hear me. We're always displacing something. Now it's often not a it's not a wholesale displacement. It will start with a study at a time. And generally, We will be displacing 1 of the top 2 large players there.
They have most of the market. There are smaller, very regional players or localized players. That's not where we play too much. So we'll be replacing the top 2. And as to why, it's It's a better EDC.
So the study builds are faster. It's a more agile development environment. And That's a huge reason. And then the review, the basic of the data review process is a bit more streamlined And it's true cloud, so it's always upgraded. And then we have a very good CTMS product and eTMF product.
And especially many of those CROs have our eTMF product and now increasingly some have our CTMS product. So they're looking at getting the whole suite from Veeva. That way, they don't have to maintain these troublesome integrations. They can have a Smooth process flow because the CROs are all about efficiency and they can get more efficient. It's the same reason why people get a suite of applications from SAP.
When things are pre integrated together, it's more efficient.
Got it. That's really helpful. And then I wanted to get maybe a little bit Color on the subscription net retention rate, I mean really impressive to see it actually tick up and looks like it's at the highest level since FY 'seventeen, I was wondering if you could give a little bit color on what drove that improvement from last year and actually prior couple of years and maybe how we should be thinking about that metric going forward? Thanks.
Yes. Let me give you just a qualitative view on that. The last year has been pretty remarkable from the standpoint of our customers have been put under significant pressure on both on the development side, But also on the commercial side of the business, they've been forced to change and think differently about how they're operating. And we've been in a good position where we've established the foundation with most of these companies and we've helped them Operate efficiently, maintain business continuity, operate more digitally, operate more virtually. When doctors' offices were closing down, when Clinical research sites were closing down.
We were there. So that I think that's showing up in the retention numbers that you're seeing. We are Viewed as that as even a more strategic partner, it's created opportunity for us to shine even beyond The last couple of years. So in these challenging times, companies need a partner that Execute consistently. And I think that's part of what you're seeing in that higher retention rate.
I think the one last thing I'll add is The broader vision that we talk about in each area, commercial cloud and development cloud, about bringing all of these process areas together. Companies are buying Broadly into a development cloud vision. And then what the decisions they make after that become really easy. It's really a matter of How do they get to that? How do they grow into that development cloud over time?
So it becomes more of a road mapping exercise than a vendor selection exercise.
Great. That's very helpful. Thank you so much.
Your next question comes from Brent Bracelin of Piper Sandler. Please go ahead.
Thank you. Maybe we'll start with Brent and finish with Peter here. Brent, Vault subscription in our model is Now actually larger than commercial for the first time and not only is this now the largest product, but also saw accelerating growth. So As you just think about the demand drivers that drove this acceleration in Vault this quarter, you talked about broad based, But was there any other factors that drove strength involved? And again, one quick follow-up for Peter.
Yes. We saw as People adopt products like eTMF
and they look more broadly across the clinical suite, So a lot of strength and it is truly broad based. We saw strength in CTMS. We saw strength in our quality suite and QMS as well. And so it's really an exciting time with broad adoption across our product set. So Customers
are starting to go more all in,
in the Vault space.
Got it. So it sounds like there's a little faster uptake of some of the add ons there. I know there's, I think, I guess Peter for you, I wanted to follow-up on the commentary you made around biotechs. You talked about seeing some biotechs have increasing interest in kind of going all in on Veeva. My question is, what's the biggest benefit to the biotech?
I mean, why are they coming to you saying we want to go digital first? Is it Just faster time to market, is that the primary benefit that the biotechs want? Is it just a more efficient Digital internal process, help me understand why you're seeing that at the biotech level and could this be a precursor Do other firms wanted to go kind of all in and have a digital first focus as well? Thanks.
So the concept of the biotech, so the biotech they will be developing their drugs for many years using many, many millions of dollars to go through the clinical And then they have to commercialize and that's a very, very critical time. It's a make or break time for the company. So that's the context When they some of them coming to us in the commercial cloud and wanting to go broadly in with Veeva. Now why do they want that? A, they need somebody they can They know digital is really important and they need a partner they can really trust.
They've learned to trust these and many of them have been using us on the R and D side. And they have to do it right digitally. And so they this is kind of new, right? It's not same way to do it, so they're looking for a company that can put it all together for them. And I think our business consulting is critical in this.
In fact, when they go all in with us, business consulting is basically a required part of that Package because you can't do that just with technology. You need the business process work to make the technology work for you. It's critical for the biotech and they trust us and we have the complete package. That's why they come to us. Otherwise, they have to be the general contractor.
They might buy data from here and software from here and digital from there and content from here and get consulting from another place. That's more areas that could fall down if the company has to be the general contractor. So, hey, have Veeva do that for us.
Certainly helpful and explains Why we're seeing certainly a big uptick in number of job openings on the consulting side. Thank you so much. Thank you.
Your next question will come from Curt Materne of Evercore ISI. Please go ahead.
Hi, thanks very much. Peter, you're obviously spending a lot of time With your customers talking through their own digital journey from a sales perspective, I was kind of curious about how you're thinking about your own go to market operations, Not only in the coming year, but how are you thinking about making some changes? And then hopefully when people can start getting on planes over the next Few months or 6 months, are there any products that you think will be helped out by the fact that you can have people on-site talking to your customers in person again? Or have you gotten to the point where you all can sell pretty much the whole portfolio virtually at a pretty effective level? I'm thinking about things like data Where these are big transformations that maybe having those conversations in person might be helpful.
So can you
just walk through kind of Anything you're changing
this year and then anything that might be helped out maybe by moving past COVID? Thanks.
What we're changing this year is our summits. We have our customer summits. Those are always a key part of Veeva. We get the customers together. We would always do those in person, 2 day events.
Last year, we had to pivot very quickly to do those online and they went well, but I think we can do better. So this year, we're looking at doing our virtual events even better. We're going to try out some new formats that we're really Excited about, so that's one thing and have the marketing and the customer engagement a little more continual. We've got to remember last year, we had to pivot So hard on our product model, our product roadmap and to support our customers and all their twists and turns. So we were sort of hair on fire.
This year, we're in a Steady state, I think, with COVID, and so we're going to optimize some of our marketing and sales processes. Now in terms of getting back together, I don't think that will impact any one product more than any other product, but I do think that in person interaction generally does help the speed of business. I think overall business will be a little more ineffective over time if we don't get back together. No, that won't just affect you. I just think overall that personal connection is needed.
It provides people with energy and ideas and travel Has a way of shaking you out of your norm. So I'm really looking forward to it. How about that? We're going to travel. When we And we're going to get out there because you get used to just being not having that interaction and something is missed.
So the whole Veeva team is and our customers. We're looking to get back together again.
That sounds correct. Congrats on
a nice year. Thank you. Thank you.
And we
have time for one final question from Stan Zlotsky of Morgan Stanley. Please go ahead.
Perfect. Thank you so much guys for taking my question and congratulations on a very strong quarter. I actually wanted to come back to net revenue retention for a second, because I mean That was certainly an impressive result. Maybe help us unpack it a little bit. And How much of the uptick did we saw in net revenue retention to 124% in fiscal 2021 was due to the quite like inorganic or maybe one time contribution from Selling the Cross X product into the installed base or maybe even the Engage product, obviously, that's completely organic made by you, but It was obviously a disproportionate benefit this year as well.
How much of that was a driver of the uptick versus what's really sustainable going forward into fiscal 2022 and beyond?
Hey, Stan, it's Brent. So, clearly Engage did contribute to that, but what I would say is development cloud more broadly also was a big driver Of that uptick as we continue to land and expand our offerings across our customer base. So it was more than just a one time pop. There was some substantial Attach and cross selling that happened in the development cloud space that helped drive that number.
Got it. That's helpful. And just maybe taking a slightly reverse Way to ask the question about the pharmaceutical headcount reductions. And as much as in Q3, you guys were talking to us about potential for What happens if that decline is not 10%, right? I mean, what's baked into your billings guidance for fiscal 'twenty What happens to what kind of renewal base do you have baked in there?
And are you truly baking in 10%? Or is it something less than the 10% of the reductions that you're talking about in Q3? Thank you.
Yes. So we, in fact, are baking those reductions in and we bake them in over time because We don't see this as an abrupt change. We see it as a gradual change that will happen over time. It will happen, we believe over the next 1 to 2 years. Now the impact on our financials will be somewhat muted because that will happen over a period of time.
Maybe even a change that happens This fiscal year may not hit us until the next fiscal year. And I think a lot of that will be offset by strength that we're going to continue to have. We're anticipating having in CRM and in the Having in CRM and in the add ons in the broader commercial cloud portfolio. So we have in fact It baked those reductions in. But again, most of what you see there is offset by some of the core commercial cloud strength.
Got it.
Thank you. Thank you, guys.
And we have no further questions. I'll turn the call back over to the presenters for any
All right. Thank you everyone for your time and we are looking forward to talking with many of you at the Morgan Stanley