Earnings Call: Q2 2020

Aug 27, 2019

Good afternoon. My name is Chantelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to Veeva's Fiscal 2020 2nd Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star, then number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Rick Lund, Investor Relations Director, you may begin your conference. Good afternoon. Welcome to Veeva's Fiscal 2020 second quarter earnings call for the quarter ended July 31, 2019. With me on today's call are Peter Gassner, our Chief Executive Officer, Paul Shawah, SVP of Commercial Cloud, 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-Q, which is available on the company's website at www.veeva.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, August 27, 2019. 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. Finally, I'd like to welcome you to join us at our Annual Analyst and Investor Day on October 2nd in San Francisco. If you haven't received an invite and would like to attend, please feel free to reach out via email at the address ir@veeva.com. If you can't join in person, the event will be webcast with both the live and archived versions available on our investor relations website. 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. Q2 was another strong quarter with results above our guidance. Total revenue was $267 million, up 27% year-over-year. Subscription revenue grew 28% year-over-year, and our non-GAAP operating margin was 39%. Veeva has now passed a billion-dollar revenue run rate. This is a year and a half ahead of the target we first laid out in 2015. With customer success as our driving force, we were able to exceed our goals through exceptional focus and execution. Thank you, and congratulations to the Veeva team. Today, we also announced our CFO, Tim Cabral, is retiring next year after a 30-year career and 10 years at Veeva. A search for his replacement is underway, and Tim is staying at Veeva through the hiring and onboarding of our new CFO to ensure a smooth transition. I'd like to express our appreciation and thanks to Tim. He's an exceptional leader, having helped guide Veeva from a startup to our current scale. He also built a strong team. Working with Tim at Veeva and at PeopleSoft before that has been a true partnership that I value deeply. Turning to the details of the quarter. Strong momentum in Commercial Cloud contributed to our outperformance in Q2. In core CRM, we continued to extend our leadership position with new SMB customers and additional enterprise expansions. Customers continued to adopt more CRM add-ons. This happens on a product-by-product and region-by-region basis. Let me give a couple of examples. Veeva CRM Engage had one of its strongest quarters as 4 top 20 pharmas expanded their use of Engage to new field teams. Customers are attracted by the deep functionality and multi-platform support of Engage and the very tight integration with CRM. We also had an important design win at a top 20 pharma for Events Management. This customer has been using core CRM globally for many years and recently decided to expand their Veeva relationship to include Events Management in more than 90 countries over time. They chose Veeva because we have the deep functionality and professional services capabilities needed for a global Events Management rollout. They will replace multiple custom systems and spreadsheets, leading to a more efficient and compliant global process. It's great to see this expanding relationship with a long-standing customer. Turning to Vault, we continue to have great momentum. Vault now has nearly 650 customers, and as of Q2, represents more than 50% of total revenue. This is an exciting milestone. When we started Vault a number of years ago, the potential was clear to me. As I look ahead, it's also clear that we're in the early days of Vault. This quarter, a newly independent top 20 medical device company standardized on Vault across the organization, including clinical, quality, regulatory, and commercial. With the ability to start from a clean slate, they chose Vault because it's the only solution to provide best-in-class application suites on a single modern cloud platform. Our customer success focus and commitment to the medical device industry was also key. In clinical, they will use Veeva Vault eTMF, Veeva Vault CTMS, and Veeva Vault CDMS. Let's focus in on Veeva Vault CDMS. They chose Veeva Vault CDMS over their incumbent system for a few reasons. First, they were looking toward the future and long-term partnership, so they liked our pace of innovation. They have seen Veeva CDMS evolve rapidly over the past 12 months and are excited about what's ahead. They also saw that Veeva CDMS is well-suited to running all their types of studies. It can handle the complex studies, but also it's practical to use for small studies that are built on short notice. They also wanted clinical data management and clinical operations all on a common platform to gain operational efficiency. We now have a top 20 pharma and a top 20 med device company as lighthouse customers for CDMS. These early adopter accounts are very important, and their success is a major focus for the team. CTMS is also progressing well. We continue to win more deals and now have 50 customers signed in just 2 years since the product was released. That's amazing momentum in a highly complex area. Our progress here speaks to the significant need in the market for a modern CTMS solution. We believe Vault CTMS is poised to be the leading solution over time. Drilling down into quality, we signed our 10th top 20 pharma for Vault QualityDocs. Following their success with Veeva Vault PromoMats, eTMF, and submissions, this customer selected QualityDocs as part of their move away from a legacy content management platform. On the QMS side of quality, we ended the quarter with more than 100 customers. The need for modernization is driving the move to Veeva in this area, as is the benefit of having QMS integrated with QualityDocs and training on the Vault platform. This is another great example of the innovation we are bringing to an underserved market. Finally, I'd like to give an update on our efforts outside of life sciences. I'm pleased with the progress we are making within our three focus industries, CPG, chemicals, and cosmetics. Since announcing the new Veeva Vault Claims product last quarter, we now have projects in place at three top CPG companies. We are also executing well in chemicals and cosmetics. Customer success drives our business in all industries. This quarter, we had major go-lives at a top 20 CPG, a top 20 cosmetics company, and two major go-lives in chemical. In closing, we had a great quarter. Our results reflect the customer trust we have gained through consistent innovation, focused execution, and our commitment to their success. With that, I'll turn it over to Tim. Thanks, Peter. Q2 was another quarter of solid execution across the board. Total revenue was $267 million, up from $210 million 1 year ago, a 27% increase. Momentum across Vault continues, with Vault now representing 52% of total revenue, up from 46% in Q2 of last year. Subscription revenue grew 28% to $217 million from $170 million last year. Vault represented 48% of subscription revenue, up from 42% 1 year ago. Year-over-year growth benefited from particularly strong bookings in the first half of the year and from 190 basis points of tailwind from 606 due to the recognition of unbilled revenue from multi-year orders with ramping fees. Services revenue was nearly $50 million, up 24% from $40 million 1 year ago. We expect services revenue to be roughly flat sequentially in Q3. We continue to see strong profitability in Q2. Non-GAAP operating income came in about $104 million, a 39% operating margin above the high end of our guidance. This was primarily driven by outperformance on the top line. We made good progress investing in the business with a record hiring quarter. Approximately 180 net new employees joined Veeva in Q2, bringing our total head count to 2,827, up from 2,376 1 year ago. Moving to the balance sheet, deferred revenue was $329 million, compared to $364 million at the end of Q1. This resulted in calculated billings for the quarter of $234 million, which was ahead of our guidance of $220 million. This was a function of a strong bookings quarter, outperformance in services revenue, and better than expected billing duration for the new business closed in Q2. Please remember that there are numerous factors that make year-over-year comparisons of this metric highly variable on a quarterly basis. 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 $185 million in Q3 and roughly $1,135 million for the full year, which is a $15 million increase from the high end of our guidance provided last quarter. Elsewhere on the balance sheet, we exited Q2 with over $1.4 billion in cash and short-term investments. Up from over $1.3 billion at the end of Q1. This increase was driven by our performance in cash from operations, which came in at $100 million and included $17 million in excess tax benefit related to equity compensation. For the full year, we now expect cash from operations to be $345 million-$350 million, excluding this excess tax benefit. Let me conclude by sharing the outlook for Q3 and for fiscal 2020. Next quarter, we expect revenue between $274 million-$275 million, non-GAAP operating income of $103 million-$104 million, and non-GAAP net income per share of $0.54-$0.55 based on a fully diluted share count of approximately 159 million. For the year, we expect revenue in the range of $1.062 billion-$1.065 billion. We expect subscription revenue to be in the range of $871 million-$874 million, and within that, we now anticipate Commercial Cloud subscription revenue growth between 13%-14% and Vault subscription revenue growth of at least 40%. For fiscal 2020, we expect non-GAAP operating income of $401 million-$404 million, a margin of about 38%, roughly a 100 basis point increase from our previous guidance. Coming off of a record hiring quarter, we plan to continue investing for customer success and future growth with an aggressive hiring plan for the remainder of the year. We are now targeting non-GAAP net income per share for the year between $2.11 and $2.13 based on a fully diluted share count of approximately 159 million. Before I wrap up, I'd like to share some additional thoughts on my retirement. As Peter mentioned, we've kicked off the search for my replacement, and I will be here through the full onboarding. As I retire from an incredibly rewarding 30 years in technology, my 10 years at Veeva have been the most fulfilling of my career. It has been a privilege to be part of such a talented team and a truly great company. The impact Veeva is having on our customers and the industry is remarkable. This is evident in our quarter's results and our outlook for the back half of the year. The opportunity ahead, along with the team's focus and consistent execution, sets us up for a trajectory of long-term growth. As always, thank you for joining the call. 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 number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roll. Your first question comes from Bhavin Suri with William Blair. Your line is open. Hey, guys. This is actually Dylan Becker on for Bhavin. I guess I just kinda wanted to start off around Nitro and Andi adoption. What are you guys necessarily hearing from customers, and how has the implementation process gone? It looks like you're now projecting cloud growth of 13%-14% for the year. How much of this is kind of attributable to the Nitro and Andi adoption? Yeah. Hey, Dylan. This is Paul. Thanks for the question. With regards to Nitro, you know, we added some additional customers this quarter. Last quarter, we talked a lot about some of the early customers that we had who were on stage at our big summit event, and they were talking about their implementation. Now, they've been live for a period of time, and that's going extremely well. The product is certainly working in the early market. I would say we're feeling a little bit of headwind from some of the anti-competitive behavior from IQVIA. Some of the same behavior that they've demonstrated with Network, they're also demonstrating with Nitro. We have to balance some of the success that we're seeing with these early adopters with some of the headwind that we're seeing as well. I would say with ANDI, you know, we're focused on getting the product to the right level of maturity and also, you know, getting some of those early customers kind of signed up and live. You know, this is still early days really for both Nitro and for ANDI. From a contribution standpoint, you know, it's gonna take some time before their material and meaningful impact, you know, from a contribution perspective. Okay. Yeah, great. Thank you. I guess kinda just in general, as you look at the geopolitical environment around drug pricing and regulation, can you kinda remind us, does this have any effect around you guys' go-to-market here? Are you seeing, I mean, what are you seeing and hearing from customers around this as well? Thank you. Yeah. Thanks for the follow-up. It certainly has the potential to have an impact on how we go to market and also, you know, more importantly, you know, the types of relationships that pharma companies have with their suppliers. We haven't seen any of that yet. You know, drug pricing has the potential to have a very significant impact across the industry. It would affect all suppliers, you know, Veeva being some of the same, you know, in that same grouping. What I would say is we haven't seen any impact yet. I'd also say that, you know, as they have more pricing pressure and as they have more cost pressure, the balancing side of that may create a tailwind, is the fact that companies often look to technology to try to drive efficiency. I think there's a little bit of a potential headwind, but there's also some opportunity for technology to drive efficiency and cost savings as well. Okay. Great. Yeah. Thank you guys for taking my questions, and congrats again on the quarter. Thank you. Your next question comes from Brad Sills with Bank of America Merrill Lynch. Your line is open. Oh, great. Thanks guys for taking my question. Just one on CDMS. Obviously, you're seeing traction there in the top 20 segment of the market. I know you've been working on features as you're kind of moving up with reference building there. Are there any features in particular you'd point to say, "Well, you know, now CDMS is ready for these top 20s, and maybe we're hitting a tipping point? Good question, Brad. This is Peter. In terms of features, you know, you can always add more features, that's for sure. Software is never done. We're pretty well feature complete now, I would say. Of course, features need to be rounded out over the years. What people would look for now is just proven success. Some are gonna want to be more early adopter-ish than others. I think we're in the normal technology adoption lifecycle. This is a critical area for life sciences, so it's not something that they're gonna switch out easily, right? Without thought. You know, we're doing well in features, and in fact, in some cases we're really getting out ahead of things, because we're taking a fresh approach. Since you asked about a product, I'm gonna give you a detailed product answer, 'cause I like that stuff. All right. When clinical data management started, you know, many years ago, electronic clinical data management started, it was about collecting data points of the patient. Now, as medicines and therapies have become more complex, it's becoming more important to collect qualitative medical assessments from physicians, from third-party physicians who are assessing the data points. That's been an afterthought in medical device in CDMS systems for many years. Because there was no innovation in the market, that just persisted. Now, when Veeva comes out, we actually put excellent features in for that. In some cases, in some feature areas, we're actually taking a fresh approach and leapfrogging the market, and this medical assessment is one of those areas. That's great. One more if I may, please. Just on commercial, you obviously raised the outlook for this year. Where would you point to in particular on the outperformance? It sounds like you've got a new customer win there, but also you're executing well on some of these add-on attaches, you know, more company-wide. Any color you can provide on that, please. Thank you. Yeah. Hi, this is Paul. I'll take that one. You know, the outperformance in commercial is driven by a couple of factors. First, CRM. We're seeing our enterprise customers expand into their regions faster than expected. That expansion's continuing to happening and, you know, we'll continue to see a bit more of that in the enterprise side. We're also seeing strength in small and medium-sized companies. These think companies that are pre-commercial. A lot of the net new wins here are pre-commercial companies and they're launching their first product. What they wanna do is they wanna launch and have the most successful launch, you know, based on modern technology. We see a lot of success there. The other trend that's happening there is they often go in with Veeva CRM and a number of the add-ons in the initial purchase. We see that that is a bit of a trend that's continuing. You know, some of the add-ons. CRM has strength. I would also point to a few of the add-ons that are kind of outperforming what we'd expected. Engage is one area where a number of enterprise customers have began global expansions on Engage. That will take time. That will happen over months, if not years. We're seeing that trend continue, where they're able to demonstrate results and build out that business case. We've also seen great performance better than expected with Approved Email and also for OpenData. I think what's driving that is, you know, the industry trying to move to digital, a bit faster as well. We're seeing strength in both in CRM and the add-ons. Great. Thank you so much. Tim, congratulations on your move. You'll be missed. Thank you, Brad. Your next question comes from Sandy Draper with SunTrust. Your line is open. Thanks very much for taking my question. I guess my question is going back to the hiring side. Tim, I think you commented you had maybe the most hires of any quarter. I think I may have heard that correctly. Just trying to get a sense of what's driving that and how much wage inflation is there? Are you competing against other players around the life sciences area, or is it really more competing against tech people, a little bit of both? Just trying to get a sense of, you know, if you guys keep growing and selling is on the top line, how hard is it gonna be to hire to support that demand? Thanks. Yeah. Sandy, this is Tim. Thanks for the question. Peter, I don't know if you wanna add anything here on the hiring side and what we're seeing. I think a couple of things have contributed to what was our strongest hiring quarter to date. You identified that correctly, Sandy. Number one, we have a very strong university hiring program, we call Generation Veeva. As you can imagine, typically you'll see in Q2, and sometimes it spills a little bit into Q3, but mostly in Q2 is when we're hiring a lot of folks into that program, both on the engineering side and the consulting side. That has been a focus of ours over the last couple of years, as our thesis is we really want to continue to grow industry cloud expertise. We can do that from the university folks as they grow in the company here at Veeva. Secondly, this may get to your wage inflation question as well, Sandy. What we've done a very nice job, I think, is we've opened up new hiring markets for us or focused more of our energy on newer hiring markets. Obviously Pleasanton and the Greater Bay Area is a very strong market for us, and we continue to focus here. We've also, over the last couple of years, really focused on Toronto and Columbus as other areas where we're finding both products people, some customer service people, and some back-office people as well. I think the expanding the number of markets we can hire from has also helped in our execution around hiring. Peter, I don't know if you had any additional color there. Yeah. Tim summed it up well. It's about expanding locations. You have to do that. Then in terms of competition, it depends on the segment, whether it's fresh out of college, okay, that's tech companies and consulting companies. In engineering, you're competing against tech companies. In the field for general sales positions, you may compete against all tech companies. Then in some of our domain-specific areas like strategy, yeah, there we're competing against other life sciences-specific companies. It's always the same, right? You have to compete to field the best team. That's the way you get the best company. Great. That's really helpful. Thanks. Congrats on another great quarter. Thank you. Thanks, Sandy. Your next question comes from Kirk Materne with Evercore ISI. Your line is open. Thanks very much. Peter, I was just wondering if you could talk a little bit about the outside life sciences or the OLS business, just in terms of reference ability and kind of where you are there and what your thoughts might be around sort of upping the sales motion, you know, if you are getting closer to reference ability. Thanks. Yeah, we're happy with our progress outside of life sciences. Still early days, so our concentration really now is in some of these large customers we have, rounding out the products. We are getting more referenceable over the time. You won't see a hockey stick type of effect, but more of an even acceleration of the market, and that's what we're seeing. Okay, that's helpful. Tim, maybe just on your 606 comments. Is there anything left on that front in terms of, you know, sort of ramped deals that we should be thinking about, I guess exiting this year and into next year? Yeah. Kirk, thanks for the question. In terms of 606, as you know, we get a little bit of a revenue uptick given the new revenue guidance around unbilled revenue of multi-year deals that have ramping fees and that are non-cancelable. Really at the end of the day, it boils down to the mix of those types of deals. There are a number of, you know, we're in the early days of Vault, which is where we see these. There's certainly an opportunity where those types of deals and/or the mix of those deals either continues in a steady way or grows or contracts. It's not something we specifically forecast. as I think I said last quarter, I'll say it again here, as we see the actual impact of that, be material to the results, as I've done in the last two quarters, I'll make sure, I give that transparency and color. We think about it internally sort of like FX in that way. When it's material, companies like us will talk about it. Super. Thanks very much. Tim, congrats on a great run. Thanks, Kirk. Your next question comes from Ken Wong with Guggenheim Securities. Your line is open. Great. Thanks for taking my question. Obviously a couple of good CDMS wins these, you know, last two quarters. You know, Peter, how do you see the recent acquisition of Medidata impacting the CDMS market? Do you view that as a general kind of a tailwind or headwind for you guys? Well, the acquisition of Medidata by Dassault certainly caused a lot of questions from customers, which is normal, and some of those questions were, you know, they would ask, customers would ask of us, you know. But we really haven't seen any change in the market. When we look at CDMS, it's really about building the best product, getting customers, getting them live and happy and successful and really innovating it in the market. We have really seen no effect of the acquisition so far. How it will play out in the future, you know, that's of course unknown and that's not where we'll focus, but we're really focusing in on our customers now. Any sense if that might give you guys, maybe a bigger window to reach out to customers since there's, I guess, there's sort of a change in terms of who they have to deal with now, or has that also been fairly neutral at this stage? Always will cause a customer to consider. That's probably one thing they will consider as they're evaluating a system. It's not something that we've seen materially affect any of our business or affect any type of competitive dynamics at this time. Yeah, got it. If I can squeeze one in for Tim. You know, earlier you touched on duration helping billings. Can you talk about what's causing this? Should we expect this trend to continue? Ken, thanks for the question. That was of the billings beat, that was a smaller component of the billings beat. Probably roughly half of the billings beat that we talked about was stronger bookings in the quarter. As it relates to duration, it really becomes a mix of the deals that we close in any particular quarter, and it can change based upon when the customer's renewal date is and depending upon the length of the add-on order. It could depend upon whether the customers that we're closing in a particular quarter are more quarterly billers versus annual. There's a lot of different factors which play in there, Ken, and it really depends on the mix as to whether or not that creates a little bit of uptick in billings. Now you can imagine with the complexity there, it's, we're likely on the conservative side as we think about forecasting for that particular component. As I said, that was not the biggest part of the beat in the billings area. Got it. Great. Thanks a lot, and congrats on your well-deserved extended vacation. Thanks, Ken. Your next question comes from James Rutherford with Stephens Inc. Your line is open. Yeah, thanks for taking the questions, and congrats on the quarter. A couple from me. First, on artificial intelligence, we observed a rise in your innovation around AI. Of course, we have Veeva Andi and then AI for PromoMats, and then recently we launched Safety.AI. The question is it fair to say that you all will just apply AI to really every aspect of commercial involved, and I guess OLS down the road as well? The second part of that question is AI kind of a meaningful TAM expander or are these just mostly feature additions that you'll kind of continue to use to differentiate the product? A little help on the context for AI. Okay. James, yeah, AI is it's a long-term trend. I remember when I was getting my computer science degree in the late eighties, you know, it was the early days of AI, and it's continued and it's getting more useful and impressive as the days go on. In terms of Veeva, you will see AI applications from us, different applications that we can make now because the AI capabilities are there that we couldn't make before. You mentioned Safety.AI and Andi. Those are fundamentally AI applications, brand new AI applications for us. We'll add AI into many areas of our existing applications. The automatic claims linking in the PromoMats, the approved notes for recognizing text sentiment in CRM. What increases our TAM is when we make more applications. AI over the years is gonna allow us to make more applications. That's probably the best way to think about it, and it's gonna be a gradual expansion. AI grows over the years, the capabilities. It's not an on and off switch. Okay. Helpful. Thank you for that. Then, Paul, one for you, if I may. We took note of the MuleSoft partnership announced recently. I'm just curious if you can help us understand how that fits with your Nitro strategy. MuleSoft obviously being a leader in iPaaS and API management. Should I think of Mule as just kind of a way to grease the skids and help life science companies get that data into Nitro more quickly and easily? Just, you know, some thoughts around how that fits from a technology perspective. Thank you. Yeah. We actually think about MuleSoft a little bit differently, and the focus for the announcement that we had with Salesforce around MuleSoft was focused on our Vault applications. There's different mechanisms on getting Nitro data into Nitro that think of that separately. You know, as our customers are expanding their Vault footprint and getting more and more Vault applications in really kind of these mission-critical areas, the number of applications or systems that they need to integrate to becomes higher and higher. What we look at when we think of the MuleSoft connector as a way to make those integrations seamless, more seamless, faster, easier, and easier for our customers to support and maintain over time. think about MuleSoft more specifically as it relates to Vault applications, which is the kind of the focus of that integration today. Okay. Thanks for that color. Nice quarter. Thank you. Thank you. Your next question comes from Rishi Jaluria with D.A. Davidson. Your line is open. Hey, guys. Thanks for taking my questions. Tim, congrats on all your achievements with Veeva over the past 10 years. They've been a pleasure. I think you set a great standard for other SaaS company CFOs to follow. On that, I would love to hear what are you looking for in your replacement to kind of ensure that it's gonna be a very seamless transition from you to whoever takes over your seat? Yeah, Rishi, first, thanks for the kind words. You know, I think as Peter and the board and I look for the key attributes of our replacement, it's someone who, as I think I've tried to build, can be a really good business partner to Peter, to the leaders within the company, and can connect to the board as well. Someone who has some level of domain expertise around SaaS would be very helpful as well, 'cause as you talked about the pattern recognition of what are the key metrics and the things that make sense to a SaaS business. Again, it doesn't have to be someone who's been in SaaS for 20 years, but some familiarity would be very helpful. I am more of a finance person. Our Chief Accounting Officer, Michelle, is much more of an accountant. Maybe we fit a mold more like me, where it's more of a finance background, as opposed to an accounting background. I wouldn't rule out either of those, but I think I would lean in that direction. And then really, you know, someone who has the level of passion that I think is required for this job and really wants to take on what I think is a unbelievable opportunity at an unbelievably impactful company like Veeva. I don't know if that was a resume description, but there are some of my thoughts. Great. That's really helpful, Tim. Then Peter, one for you. If I'm not mistaken, I believe Tom Schwenger joins next month. Would love to kind of hear your perspective on what you expect or what we should hope for out of Tom joining, you know, and maybe his first 90 days at Veeva, especially given that the R&D summit is coming up in the next week and a half, 2 weeks. Thanks. Tom is joining next month. He is a quite accomplished veteran, brings a lot of customer relationships and just knowledge of operating at scale, teams of thousands of people and revenues into the billions at Accenture. The area Tom will focus on for us is in the sales area as a President and CEO, the field. Not only the sales, but the field area. The customer success, the sales, the services, the strategy area. Tom will be based on the East Coast as well, Philadelphia. He will cover that region. Tom will be one of the key members of the management team and partnering with me. Tom's strength, again, is in deep understanding of life sciences, execution at scale and executive relationships and team building, and that's what I expect Tom will do for us here. Great. That's helpful. Thanks, Peter. Thanks, Tim. Thanks, Rishi. Your next question comes from DJ Hynes with Canaccord Genuity. Your line is open. Hey, thanks, guys. I wanted to follow up on the CDMS line of questioning. As I think about purchase decision considerations, say for a top 20, is there a competitive advantage to sticking with an incumbent where there may be a data history? You know, is each trial such a unique entity that, you know, in theory, it would be easier to cut over to a new vendor? Good question. Each trial is independent in its data. The long-term repository of the data, meaning where does the data go after the trial is finished, that's an independent system. That's not normally collected, connected. It's not normally the same as the clinical data management system. It's normally you can think of it more of a data repository or a data warehouse that's separate. That's not an impediment. What is hard for people when they considering switching is your clinical data management system has to be integrated with your other systems. If you bring in a new clinical data management system, that's other integrations to write and other testing and validation to do, because for a while, for a considerable period of time, you'll be running multiple systems. That's a tack. That's why this type of change is not considered lightly. Yeah. Okay. Did that answer your question? No. Yeah. No, that's perfect. That makes perfect sense. Then maybe kind of a bigger picture question. As we think about product roadmap for Vault, maybe over, you know, a 3-year period or so, should we expect new efforts to predominantly stay within life sciences? Are we getting to the point where, you know, the suite's pretty built out, so maybe we start to see more in new verticals? You know, I wanna be clear, I'm not asking about sales execution or opportunity. I know there's still a huge runway in life sciences, but more just kind of how the product evolves. How the product evolves. Well, there's a history I think of Honestly, what I believe is there's a history of underestimating the potential inside of life sciences. I saw that in 2010. I saw that in 2015. Now as we approach 2020, I also see that. I think a lot of our expansion can still come inside of life sciences. I think we're actually relatively early in the industry cloud for life sciences, as surprising as that would seem. Yeah. Now, some proof of that is in, okay, look, the clinical data management area for us is brand new. The safety area is brand new. There are more things that can be done in life sciences, especially as we accumulate more and more data about life sciences. We are doing well outside of life sciences, but I wouldn't underestimate inside of life sciences. That and I would say also just in general, our core platform of Veeva Vault, that's in its very early days. You know, I know how these things play out, you know. When you really invest in a platform, that's something actually that you monetize, we're talking over 20-30 years. Yeah. Veeva, you gotta remember, is only 12 years old, yes. Vault is only eight years old, so it's still very early days. Yeah. Okay. Very good. That's helpful. Thank you. Tim, congrats and good luck. Thank you, DJ. Your next question comes from Brent Bracelin with KeyBanc Capital Markets. Your line is open. </edited_transcript Thank you. I guess one for Peter and one follow-up for Tim, if I could. Peter, it's clearly been an incredible first half for Veeva. You know, milestone quarter here, crossing over a billion-dollar run rate. I think there's few companies that they're able to do this with accelerating growth across two major product categories. Things are clearly humming right now. My question is more about next year. As you look at the product pipeline, customer opportunity, what are you most excited about looking out into next year, given things seem to be going really well right now? What are you most excited about next year? One quick follow-up for Tim. Oh, gosh. Next year, it's just there's a lot of excitement. We're bringing in new people to the company at an amazing pace. I was just in Denver Friday, and let's see, Friday, Thursday night, Friday, and Saturday with close to 250 what we call Generation Veeva people. These are people that are two years or less out of college, and they're in consulting and R&D and commercial and engineering and you know, Pleasanton and Toronto. I'm just excited about the workforce we're developing here. That's on one spectrum. On the other spectrum, we're, you know, bringing in people like Tom Schwenger, and we're growing that middle area. That's overall what I'm excited about. I'm excited about close to 3,000 people, all with a common culture, and really learning how to hum together. Now, if you get into the product area, I'm really excited about clinical data management and safety. There, there's new areas that are just super ripe for innovation and very early. I'm excited about a resurgence in what we can do in Commercial Cloud and some innovation we can bring in there. I'm excited about every year. I think 2020's gonna be a great one, and it really piqued my interest like, okay, yeah, it's gonna you know, gotta get after that. I think it's gonna be a great year. I'm not, I don't have any financial guidance, do I, Tim? No, we cannot give financial guidance. Overall, you know, I'm really excited about the mojo of the company, and that's created by the people coming into the company and the common culture where people can work together and enjoy it at greater scale. It's a beautiful thing. Absolutely. Tim, just, you know, again, to extend my congratulations on the retirement here, certainly well earned, a great run, and you will be missed. Just drilling down into the Commercial Cloud growth, I mean, we're seeing here now the second quarter of accelerating growth there. What's driving the improving visibility? You guided up for the full year here a little bit on the growth profile there. Are these Engage and Event Management rollouts big enough to kinda drive a sustained improvement in growth there? Should we think about these things as, you know, kind of, you know, a couple quarter rollouts that kinda will then kinda roll off? Help me understand the improvement on the Commercial Cloud growth side. Sure. Brent, thanks for the question, and thanks for the kind words. Yeah, we're very pleased with what we're seeing in Commercial Cloud. I would say that the recent uptick in growth that we've seen in the first half of this year, which is, you've seen it impact our guidance, is mainly due to particularly strong bookings in the last few quarters. I would echo what Paul said earlier in terms of where we're seeing the strength from a bookings perspective. It's in CRM enterprise expansions that are going faster than we had anticipated. It's in SMB wins that are better than we had anticipated. As Paul said, we are seeing some particular strength in some of the areas, some of the add-on areas, Brent, I should say, namely Engage, which Peter talked about, Approved Email, and Open Data. I think that's what we're seeing, particularly strong bookings in the last three quarters, which is really driving the uptick in revenue. You know, as you remember, we've always characterized this as a steady growth business over time. Even given this performance, that view hasn't changed in our minds. Got it. Helpful color. Thank you. Your next question comes from Karl Keirstead with Deutsche Bank. Your line is open. Oh, thank you. I've got two fairly prosaic numbers questions for Tim. Tim, maybe I missed it, but did you update the full year billings guide, I think, on the last quarter of $1.12 billion? If I recall, you suggested that, 41%-42% of billings might drop in the fourth quarter. Just wanna make sure I didn't miss that. Yeah, Karl, thanks for the question. The updated billings guide for the year was $1.135 billion, so an increase of $15 million over last quarter. That, you know, we saw that in part being driven by the outperformance in Q2. Got it. Okay, thanks for that. Sorry, I missed that. Then the second question was on your operating cash flow guidance, Tim, which was for the full year ex the tax benefits a little bit above our estimate. I calculate first half operating cash flow growth of a super strong 40% in the first half. Congrats on that performance. I'm just wondering what it's from. Is it just a function of the operating margin outperformance flowing into the operating cash flow line, or is there a little something extra? Thank you. Yeah. If you exclude the excess tax benefit, Karl, then you have the answer correct. It's really the operating income performance, which, as you've seen, is growing at a faster clip than our top line revenue, and that's contributing to the cash flow. I guess I would be remiss for not calling out my team as well, who have done a phenomenal job, with the help of the field team, and certainly the help of the customer success that we've driven over time to really have another strong collections quarter and really an amazing collections first half. You're right. It's being really driven off the operating income. When you add in the excess tax benefit, that is even a higher growth in terms of operating cash flow year over year than operating income. Got it. Okay, Tim, thank you. Your next question comes from Chris Merwin with Goldman Sachs. Your line is open. Okay, thanks a lot for taking my question. Just as it relates to QualityOne, I was wondering if there's any update to the revenue run right there. Maybe at a product level, can you just talk a bit more about the traction you're seeing with the newer claims product? I think you might have mentioned some strength in CPG, but just curious what types of customers are taking that product so far. Thanks. In terms of the claims product, you know, we have our early adopters there. The product is very, very early. They're all in the consumer packaged goods, which is where claims is generally gonna be targeted, and it's going well, but early with that. We're implementing with the first customers, iterating the product. In terms of revenue, we're happy with the progress outside of life sciences, but that's not something that we break out at this time, and we'll give you further updates as we have them. Okay, great. Thanks. Maybe just one follow-up on eight-figure customers. It sounded like last quarter that was going really well. Just curious if there's any update there and if you're still on track to reach that, I think, target of 20 by the end of the fiscal year. yeah, Chris, this is Tim. I think you've characterized it correctly. We are continuing to build deeper and larger relationships with our customers, and that's been a function of two things, I think. One, well, three probably. One, our customer success, the innovation of our products, and the expanding product portfolio, which gives us the opportunity to make a larger impact or create a larger impact for our customers. We typically have updated that number in our Analyst Day. Why don't I hold off, and we'll probably give you an update on that in the Analyst Day. You remember that was part of the recipe to get to the billion revenue run rate, which we did eclipse this quarter, and Peter mentioned that in his quote. We're very proud and excited about that milestone, and the team has done a phenomenal job of executing over the last five years or four years, since we gave that target. All right. Well, thanks a lot, Tim, and all the best in retirement. Thank you. Your next question comes from Tom Roderick with Stifel. Your line is open. Hi, it's actually Parker Lane in for Tom. Thanks for taking my question. One area we haven't heard as much about in Vault recently is PromoMats. I was just wondering if you could talk about what remaining runway you see in your existing customer base for PromoMats' adoption and any recent changes you've made to that product to make it more appealing to the market. Thanks. PromoMats is going very well. It is the, certainly the leader in its, in its market segment. We're happy with the uptake. We still have some Zinc migrations to go. Zinc, we still have some Zinc customers, and that'll be supported until the end of next year, until the end of 2020. There are some migrations in cycle, and usually when that happens, there's some growth in that because PromoMats has some capabilities that are not there in Zinc, so it tends to be expanded usage. We continue to add customers, especially in the SMB market. As new customers look to commercialize, that happens. I guess there were two things we were quite excited about. One is the auto claims linking. That I think is gonna be a real boost for our customers. That's not a new revenue opportunity for Veeva, but that's really a customer success opportunity for the customers and the industry. On a related area in what we call the commercial vault is the MedComms application. We're seeing good for medical inquiries and managing medical content. We're seeing good uptake there, and we've recently added quite a few features there that we can think can expand the usage. We're really happy about how PromoMats is doing and overall how the Zinc acquisition worked out. It worked out very well for us and our customers. Got it. Then multiple people have referenced the strength of Engage this quarter. Just wondering if that's a factor of, you know, increased demand from the market, or have there been specific features that have finally come out that people have been looking for and been more receptive to really spur that growth and double the customer count over last year? Yeah, I'll take that one on Engage. I would say it's really two things. One is, you know, this is a different way of going to market. It's, you know, think of an industry that's been so focused on, you know, meeting in person, and now you give them the ability to do something remotely. There's been a lot of change management. I think what we're seeing here is over the last couple of years, a lot of customers trying and learning and figuring out how it works and how customers are gonna respond and what works well and what some of those best practices are. They have since learned enough to build that business case and increase the demand. We're seeing demand from different markets across the globe who wanna drive the adoption of that. I think there's a learning and change management component, and I think that's largely that's happening relatively quickly. It's just a natural part of the life cycle of a new product like this. I would say the other thing that's driving it is just the shift in our customers' mindset to get to digital faster to evolve to put in place you know the infrastructure to support their selling models of the future. All of our customers are in some respect talking about how what their future selling model is gonna look like and digital is becoming a bigger and bigger piece of that. What we're trying to do is make sure that, you know, we enable a lot of that, a lot of that shift, in the market with a lot of the innovation. You know, Engage is one of the products that's driving that. Got it. Thank you. Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. Our final question will come from Pat Walravens with JMP Securities. Your line is open. Hey, this is Joey on for Pat. Congrats on the quarter, and thank you for taking our question. Just going off the product questions, we were wondering about any new, product initiatives you may have in the pipeline, particularly regarding Vault. Thank you. In terms of new product initiatives, boy, there's lots of things. There's adding on to existing products, that's going all the time. You know, you gotta refine them. You're adding new features and functions, keeping up with the regulations. That's the bulk. You're doing integrations between our suites. That's the bulk of things going on. In terms of brand-new products, you know, we always have ideas about that and always thinking about that, but nothing we could announce at this time. Thank you. I will now turn the call back over to Peter for closing remarks. Thank you, Operator. I would like to thank everyone for joining us today, and we look forward to seeing many of you at our Analyst Day in San Francisco on October second. A special thanks to the Veeva team for your effort and teamwork and to customers for their trust and support. Thank you. This concludes today's conference call. You may now disconnect.