Awesome. Good. Oh, yep. Thank you, everybody. Appreciate your time and attention here. My name is Dylan Becker. I'm the research analyst here at William Blair that covers Veeva Systems. We have the CFO, Brian Van Wagener, here with us today. For all of the necessary disclosures with today's presentation, you can find those at WilliamBlair.com Brian, thank you for joining us.
Thanks for having us.
There's varying levels of familiarity in the audience today. Obviously, Veeva has been a very successful business for quite a long time. Could you kind of help us level set the conversation, lay of the land, how Veeva and where Veeva was started, the problems you're looking to solve, and how you think about kind of the life sciences ecosystem?
Yeah, absolutely. Veeva was founded in 2007 by Peter Gassner, still our CEO, originally as a vertical CRM company. We were built on the Salesforce platform, selling CRM, initially to life sciences. The thesis for the business at that time had been to sell CRM into several different industry verticals. Over time, that evolved into the business as we have it now, which is a vertically driven software business. We are one of the few vertical software companies. Instead of selling one or a few products to all companies, all industries, we focus really exclusively on one industry today, which is the life sciences industry, and have a little over 50 products across eight different suites. It is a pretty wide business.
We were very proud in the past fiscal quarter to cross our 2025 goal that we set about six years ago in 2019 for a $3 billion revenue run rate. Our goal now is to cross $6 billion in revenue run rate by 2030, so about five years from today, and a pretty wide and large growth story.
Sure. To your point, that's been evident for some time now. As we think about maybe the industry before we kind of get into the singular products from a business perspective as well, too, there's a lot of uncertainty in the market today. There's a handful of things that are specific to the life sciences ecosystem. Could you help us maybe kind of level set the expectations of what you're seeing and hearing and kind of the puts and takes that are going on in the broader life sciences space?
Yeah, it's certainly, I mean, a complicated time. I'm sure you're all feeling it too, trying to make sense of exactly where we're at and where we're going. Our customers in life sciences are also feeling that. It's a capital-intensive business. It's a business that's accustomed to thinking in long-range investment cycles. What we're feeling is some of that uncertainty and the general unease that comes with uncertainty in a business that's used to making long-range decisions. That said, that dynamic, while it may be a little bit heightened right now, is not new for the life sciences industry. Post-COVID, there's been quite a lot of macro disruption in this space. What we've seen over the last couple of years is customers not necessarily resolve the macro uncertainty, but get more comfortable and confident navigating within it.
At this time for us, our business has been so far relatively insulated from some of the effects of that. Part of that's the nature of the business. It's largely subscription-based. In the short term, it's less sensitive, rather. Part of that's the industry continuing to operate and make decisions as usual.
If we were to think about it in the context of kind of your strategic partnership approach and, to your point, some of the long-duration types of decisions, how mission-critical your solutions are, we'll get into kind of the components there shortly. How do you think about those pillars kind of driving some of that broader resiliency and how customers think of Veeva as an enabler of their ability to navigate some of this?
Yeah, no, that's exactly right. In addition to being subscription-based, a lot of our applications, really the substantial part of our business, is in mission-critical areas that our customers have to have. You have to have a CRM if you're a pharmaceutical company. You have to have an eTMF system for your clinical trials. You have to have an EDC system to take the data in from your clinical trials. They're not really discretionary purchases. When there are times of macro uncertainty, and we've certainly gone through several of them in our history, what we tend to find is that impacts the timing of demand, but it ultimately comes back because customers still need to do those projects.
Sure. Maybe if we drill into it, right, there are two segments. There is largely the commercial and the R&D segments of the house. If we stick to the commercial side, could you kind of walk us through the core pillars of CRM, CrossX, kind of the Data Cloud, and the components and maybe interoperability of each?
Yeah. The two major sides of our business, as you touched on, are the commercial side. That's really centered around CRM as the original product, but a number of products in commercial, and then the R&D side of the house, which is clinical trials, regulatory management, safety, and pharmacovigilance, a number of different suites and applications. They're about 50/50. I think last year we crossed the milestone where R&D was slightly larger, but roughly 50/50 within the business. Within the commercial side of the house, about half of that, half of the business is our CRM suite. The other half is a range of other products.
A commercial content product, which deals with regulated content for the life sciences industry, our CrossX business, which you can think of as marketing analytics that helps them make better, higher-precision marketing investments, and then our Data Cloud, which is a number of data products. That is a pretty wide business. As you can imagine, life sciences has a lot of different data needs, from what is the address or the phone number my sales team is calling? That is our reference data business, to what is the actual prescription volume going through each of those doctors, and how do I use that to segment and target and prioritize where my reps are going? That is our Compass business, to the marketing analytics business and CrossX. It is a pretty wide business.
If we think about kind of, to your point, the most recent quarterly outperformance, too, and maybe for some time now, data and CrossX in particular has been big contributors to some of that momentum as well, too. Could you walk through maybe the specific capabilities and the differentiation that you can provide in that market versus maybe the traditional manner of working?
Yeah. Our CrossX business, the marketing analytics side, and then our Data Cloud are both founded on the same technology platform. That is the original CrossX business. We acquired CrossX about five and a half years ago, a very differentiated capability called SafeMind that allows us to target individual therapeutic conditions and demographics at a highly precise level, but in a way that is appropriately anonymous for the healthcare setting that healthcare and life sciences works in. We have seen growth in both of those businesses. Data Cloud competes primarily with IQVIA. That is a very large, mature business that has a long runway for growth. The CrossX business, the marketing analytics side, has been the more recent driver of outperformance for us and was a key contributor to a pretty strong Q1 prints. The CrossX side around marketing analytics has two major components.
One we call measurement, or sometimes measurement and optimization. That is about helping our pharmaceutical companies understand where their spend is going, how effective it is at reaching their target segments, and how to adjust their media spend to more effectively reach their targets. The second is the Audiences business. That was actually the main driver of our outperformance in Q1, even though it is the smaller part of our CrossX business. The Audiences business is a usage-based product that is delivered through programmatic advertising channels. You can think about digital advertising, connected TV. We have constructed a number of segments that are purpose-built for life sciences. If they are trying to reach people with a specific therapeutic condition or a specific therapeutic condition and a specific demographic, they are able to do that in a very precise way.
Maybe the last pillar of the commercial suite on the CRM side of the house, right? That's where the business was started. The business was founded. We've now progressed and are migrating customers over to the Vault CRM side of the equation. Could you kind of maybe walk us through what led to that decision in and of itself and how we should think about Vault CRM versus Traditional Veeva CRM?
Yeah, it's a big transition year for us and a couple of years coming up. We announced a couple of years ago that we were migrating our CRM customers off of the Salesforce platform that we've historically been built on top of. We called that product Veeva CRM and that we're moving them over to Vault CRM. There is kind of a lengthy decision process that we're taking customers through now. We hope to migrate all of those customers over to Vault CRM between now and September of 2030 when our relationship with Salesforce formally ends. Salesforce, in parallel, has built a competing product off of what was a competitor several years ago. IQVIA's OCE business was sold to Salesforce. They're building their own CRM there. We're out both talking with customers and rolling up our sleeves.
We were proud to have our fifth top 20 that we announced today commit to Vault CRM as their CRM going forward. We have five that have decided to continue to standardize on Veeva within the top 20, two that have made the decision to go with Salesforce. We are certainly disappointed with that, but continuing to work to try to win those back over time. Those are lengthy migrations and ones that we do not ultimately think are going to be successful. There are a number of decisions still in the air, and we are expecting those decisions to be made between now and the end of next year.
As you think about that decisioning cycle, we now have more customers live. I think it was 80 that are live here today relative to maybe a small handful last year, and the plan is to have 200 live next year. How do you think about referenceability and what you've seen kind of in a pattern recognition motion with the rest of the Veeva platform that can help with that decisioning cadence as we kind of reach that late 2020s to 2030 time span?
Yeah, when you work within one industry, that reference selling motion is really important. So our customers are our best marketing and sales tool. We had our commercial summit here in North America a few weeks ago and spoke to the fact that 80 customers had already gone live on Vault CRM and that we expected 200 to go live by this time next year. I think the power in that is showing it to people. And so they're hearing from their peers that are now live on this and seeing what it looks like, seeing live demos of the software. We do not see the same from Salesforce yet. So they're projected to have their first early adopter product, I think, available in September, October. So we're all waiting to see what that looks like.
As we get into next year, we're expecting to have three top 20s live on our product, including our AI module called CRM Bot. We're really excited about the progress that we're making. Our expectation coming into this year had been to win the vast majority of those decisions in the top 20, as well as in the rest of the pharmaceutical segment. We continue to expect that.
Maybe that's a good segue to the Vault platform and what you do on the R&D side of the equation. We've talked about kind of the commercial aspect of once a drug is in market. Can you talk to us about some of the components and pillars of the R&D suite and how you can make that process more efficient?
Yeah, so the R&D suite started, gosh, 13 years ago. I guess 2012, we announced the first product there, which is eTMF in the clinical operations side of the house. This quarter, we announced that 19 of the top 20 pharmaceutical companies have now selected or gone live on eTMF. We are expecting the final one in the top 20 to select us sometime this year. We are very encouraged, excited, and honored by that. I think that is a lot of trust that the industry is putting into us to innovate and continue to move the industry forward. The full R&D suite is now five different suites: clinical operations, clinical data, regulatory, safety. They are a pretty broad range of applications, 30 in total across those suites. Ultimately, our goal is to be the industry leader in every one of the applications that we have built.
To your point, as those platforms have matured and there are some that are more mature than others that are in market today, how should we think about that opportunity for broader kind of standardization from an end-to-end perspective to help with that acceleration and cleansing of the data to commercialization?
Yeah, you know, our goal in these products is for each of them individually to be the best product in its area, and then for them to all work together as an integrated suite of applications. You can have end-to-end workflows across clinical, across regulatory, across safety, across your quality and manufacturing that work together seamlessly. Part of the way that we do that is we have a common data architecture that our whole Vault platform is built on. It's, you know, we think over time going to become the industry standard for their data model. There are things that we can do as we start to enter that market leadership position that really help drive the efficiency of the whole industry. We talk about our vision as being building the industry cloud for life sciences.
That's distinct from building a lot of applications for life sciences. We want to have a whole suite of things that work together that help them operate more efficiently as an industry and bring great therapies to market faster.
Do the competitive dynamics shift between kind of the commercial and the R&D segment? Maybe walk through kind of the purchasing mechanism between those two pools from a buyer perspective.
Yeah, what's a little bit unique about Veeva is there's not a single other competitor that we go against across all of our areas. It's a number of different competitors. We just talked about what was IQVIA is now Salesforce on the CRM side. In our data business, it's IQVIA who has been the incumbent for a long time in the data space. In clinical data, it's Medidata, which is a larger company that's now owned by Dassault. It's a series of smaller competitors in quality that are more horizontal, focused on manufacturing, or in safety that are niche providers. There's not another company that we think about that's pulling together an integrated vision at a platform level, but it's a number of different competitors in each of those areas.
You talked about the platform standardization from a data perspective. You're also facilitating a lot of those mission-critical workflows, as we touched on. How do you think about those two components and pillars kind of working together to enable AI automation and kind of what an agentic landscape maybe looks like for Veeva?
Yeah, it's certainly an area we're really excited about. I would say we took a bit more pragmatic approach in the first couple of years of AI. There was a lot of noise and a lot of hype, but not ultimately a ton of delivery of successful AI in life sciences. I would attribute that to a couple of things. One is that the industry itself is pretty heavily regulated. There's not a lot of room for AI hallucinations in a highly regulated business. The second is that the privacy and security framework was not really ready for that level of enterprise. We've seen both of those things start to shift. We get very excited about our position as a system of record and the ability to build really powerful AI applications that make our customers more effective.
Our CEO, Peter, in the Q1 earnings call spoke to kind of a long-range vision of being able to perhaps help this industry be 15% more effective. When you think about the size of the life sciences industry, that would be a pretty monumental impact to have. It'd be a long road till there, but we're working very hard on our AI roadmap and execution against that and have our first couple of products launching this year.
If we think about now kind of the aggregate view between both the commercial and the R&D suites, how do you guys characterize kind of the overall landscape, the overall opportunity, the penetration against kind of what you view from a TAM perspective and how to think about kind of the pillars of the growth algorithm?
Yeah, so the TAM that we've spoken about historically is roughly a $20 billion TAM in life sciences. We're at about a $3 billion run rate right now. That leaves quite a lot of room, we think, to continue to grow into the market. Our goal, as I mentioned, is to be the market leader in every one of our products. The market is there for us to grow into. We are very excited and confident as well in our path to those 2030 targets of $6 billion in revenue. That implies when you work back about 13% revenue growth per year in a business that's quite large now. We are very excited about the long-term prospects for the company and that there's a really strong engine for growth going forward.
Maybe if we flip it to the profitability side of the equation too, I think a big pillar for Veeva has always been that dual combination of best-in-class profitability and sustained organic growth. Where do you think about kind of the steady-state margin profile of being sitting in today versus the levers that you maybe have as you continue to invest to capitalize on the growth opportunity?
Yeah, I think, as you said, the combination of growth and profit has always been in the DNA of Veeva. We've been profitable for a very long time back to the early venture funding days of Veeva. We do not view profit and growth as being enemies of each other. We think that efficiency and lean teams are the way to accelerate innovation and drive growth ultimately. We were very proud to be at a 46% non-GAAP operating margin in Q1. Our guidance for the year is for 44%. We run a pretty efficient business. We do not think about providing long-range margin targets largely because each year we take stock of what is the right way to grow the business, and then we provide that margin guidance annually.
Maybe from an investment perspective, if we're thinking about kind of the maturation of some of those newer products that are coming to market, what excites you most against some of those kind of incremental opportunities within R&D? Maybe how do you leverage that relationship you have with customers to be acute in your targeting and development?
Yeah, you know, I think what I get excited about the business is when I joined Veeva originally in 2017, it was 15 products, and now it's 50. That is a tremendous amount of growth. There are not many companies that are great at working in a multi-product environment. I think we've built a culture and an operating model that are uniquely effective there. It is always tricky when we're up on a stage like this or talking about the business because I'd love to be able to say, here's the one thing to look at or the two things to look at. There is not two things to look at. We have a number of different products that are very large, that are growing quickly, that have a long runway for growth.
What I get excited about is the quality of the teams and the execution that I see broadly across that opportunity.
We've talked a lot about the software side of the house. Maybe if we kind of flip it to the services side, could you give us a sense of, again, maybe the services mix in the business, what's valuable as you guys see kind of from a services angle here?
Yeah, so services have been an important part of the Veeva story as they are for all software companies. We are a little bit unique in that we think about that as also being a profitable business. If you look at our services business, it tends to run at pretty compelling margins. We have a couple of different sides of that. One is our professional services group, which is implementations, managed services, things that are more directly tied to our software and subscription business. That is a fairly stable business. We do not expect a significant amount of growth on that out to 2030. You see the attach rate on services generally go down as you are growing your subscription base. Where we see a lot of opportunity for growth is in our business consulting segment. Our vision is to have software, data, and consulting all working together.
That business consulting team is still relatively early in its journey. As we look out, it is the major driver of services growth that we see out through 2030.
Within that business services segment, can you give us kind of an additional layer under the onion of kind of what the projects that those teams are working on, how you're kind of helping maybe from a pure process change perspective with Veeva's technology, there's new ways of driving efficiency within organizations?
Yeah, there are a lot of different forms of that. It can range on the commercial side from very detailed commercial analytics projects, mining their data for insights. It can be working with them to think about how to evolve their marketing capabilities or to develop integrated campaigns across marketing and sales. On the R&D side, there is a lot of work around business process redesign. It is pretty common to see customers as they are undertaking a new implementation also think about how do I modernize my process and make that look different. It is a range of things. Our goal there is to provide really pragmatic, fast time-to-impact consulting that helps them work more efficiently.
We've started to see, I think, that validation from a market perspective as well too. I think there are a handful of the top 20 customers that are kind of saying, Veeva is my strategic industry partner going forward. Can you talk to the value of having the full end-to-end capabilities of the platform and what that can mean from a strategic vendor approach, a consolidation opportunity as what is kind of a typically very disparate kind of connected ecosystem?
Yeah, it's certainly something we aspire to. It will never most likely be the majority of customers that work in that way. A couple of years ago, we announced a strategic partnership with Boehringer Ingelheim, BI, who decided to go really all in on Veeva across all of our applications on the R&D side. That was a tremendous sort of confidence in the product and what we're building and the way they see their business evolving within that. We've had a number of other strategic relationships like that. We announced one at the conclusion of our Q4 cycle for a customer that had chosen all of our clinical products in one fell swoop.
Whether customers are buying applications individually or buying them as part of an integrated multi-year program, I think what we are starting to see take shape is, again, that vision of the industry cloud and a whole bunch of products that used to be siloed and their workflows working together in a more effective way.
Maybe if we're...
Maybe to switch to an idea that I think you guys brought about maybe at last year's analyst day, but a topic around moving into the horizontal application space. I think more recently talking about moving into horizontal CRM, a lot of the opportunity sitting kind of beyond 2030. How do you think investors should be thinking about kind of Veeva's aspirations moving into the horizontal market?
It is the very early days. We've spent the whole time here so far talking about our focus on a vertical segment, which is life sciences. Now we've recently announced that we're also going to be pursuing horizontal software with the CRM area as the first place that we're starting. I think about this as the third act of Veeva. Act one was CRM.
Act two was the expansion into life sciences more broadly in R&D with the development of the Vault platform and all the applications on that. This is the third act and I think another engine for growth that we see going forward. As Veeva grows, you'll see us continue to focus on the life sciences market. We've got a very mature and capable team helping to continue to drive growth there. We have a lean team right now working on this new markets area. We announced it in November, started it right around that time. We're expecting to have our first customer live later this year. They're working at the speed of a startup, which is really exciting. It will take time before that becomes a material enough part of the business to be talking about its revenue profile, its cost profile.
We're still in those early days of building the platform, building the product, getting out to customers, but should be an important part of the story as we look out, as you said, beyond 2030.
Right. Yeah, it's an additive lever to what is already, as we've kind of discussed today, a significant opportunity within the life sciences ecosystem. You also are unique in your, I guess now a handful of years ago, transition into a public benefit corporation, the ability to kind of lean into from an industry perspective of delivering value to end consumers in that context. Can you maybe talk about kind of what led to that aspiration and how that's resonating just given the importance of the end market you serve?
Yeah, kind of a long time coming, frankly.
When you play it back, it's so obvious in retrospect, but sometimes it takes time to emerge. We had always thought about Veeva as being a company that wasn't all about the money, that there was an important part of what we do that is creating great jobs for our employees, being a great contributor to the communities that we're in, but then helping this industry that we're serving. When you go talk to Veevans, I think that's what you would get is that very visceral sense that we're proud to be part of the mission that our customers have to help patients. We view a big part of our role as helping get those therapies to market faster and more efficiently. We converted to being a public benefit corporation officially a few years ago. It's something that I think has really resonated on two fronts.
One is with customers. We used to get questions like, why should I put all my eggs in the Veeva basket? What should give me confidence in doing that? We get those from time to time, but gosh, the volume has gone way down on that. I think they see it demonstrated in the way that we work with them and partner with them, but also legally the way that we're chartered and the obligation that our board has. The second is in recruiting. I think we see a lot of folks that get really excited to come be part of that mission. You can feel it when you're inside the company.
Sure. Maybe we buried the lead with this one as well too, but you've now been back at the business for a little over a year.
You were a part of the Veeva operation maybe five or six years or so ago prior to that. Could you kind of help us understand the attractiveness? Obviously, you're very passionate about the businesses. That's clear. What brought you back to the seat today and how you think about kind of the broader opportunity ahead?
Yeah, I've got certainly a winding path into this role. If you were going to pick the conventional road, it wouldn't be mine. I started at Veeva in 2017 originally as our CEO's chief of staff, and then I led our sales operations or go-to-market operations team for about five and a half years, which is great. So I've seen a lot of the guts of the business from the inside as an operator. I left for about 18 months, went to a company called BetterUp, and then returned in July of last year.
I'm not quite at a year yet, but coming up on my second one-year Veeva versary. I think for me, it's a lot of things we just talked about with the PVC resonate with me personally. It's a great business. As the CFO, it's easy to say that. It's a great, profitable, high-growth business that I'm proud to be part of. It's a great team, a great culture, a great industry that we serve, a mission that I'm proud to come in and work against every day and contribute to however I can.
Maybe to that point, I know we talked about this a little bit last night as well too, but your positioning in your kind of prior role at the firm or at the company, having seen kind of all of those seeds planted that are now taking shape and taking form and really resonating from a market perspective, could you maybe kind of help us level set the investments that you guys are making today and how that kind of correlates with your prior past experiences at the business?
It's funny. We got a lot of folks that asked us questions following Q1 because our CEO had made the comment it was our best Q1 ever. I think folks thought he was referring to the print. I know for certain the only thing he was not talking about was the actual financial results of Q1 because what he meant was all the things that we started working on or that we advanced in Q1 were the best Q1 we had. We announced these goals to grow revenue to $6 billion run rate in 2030 just a few months ago. At the time, I would say that was a little bit of a scary goal, it is one we had conviction in, but we are leading the Veeva team as much as we are communicating to you all as investors.
There was a lot that has to happen to hit that $6 billion goal, a lot that we feel confident in, but a lot that we've got to execute against. What we saw was the whole Veeva team really execute at an extraordinary level in Q1. That's existing products and existing sales cycles getting moving. It's the speed that the new markets team got going on building the platform and selecting their first entry point. It's products that are in their early adopter phase that are having really great customer go-lives happen. It's many things that have to come together in a company like ours. It gives us the confidence looking out that the future is bright and that the growth engine remains really strong.
Sure. We've talked about the financial components of the business too, but you do have a healthy cash balance that you guys are looking to potentially utilize. How do you think about capital deployments from the CFO seat? You're generating 40% at a $3 billion scale with $5 billion today. How should investors think about kind of your prioritization from a capital allocation perspective?
Yeah, so it's certainly a healthy cash-producing business given both the growth rate and the margin profile. We have about $6 billion in cash right now, cash investments. The primary use of cash that we've contemplated for this year is for M&A to support that new markets entry. We're going to continue to be very disciplined in the way that we think about M&A. We're quite proud of our M&A record. I think we've got a 1,000 batting average so far. I don't think anybody wants to lose that. We're going to be very disciplined. It would have to be a company with a great product, great financials, great leadership team, good Veeva cultural fit, right price for us, pretty frugal. A lot has to go right for that to happen. That's the primary use of capital that we've contemplated for this year.
We get a lot of questions about other forms of capital return. I think certainly that's something we'll consider at the right time. For this year, we're really focused on new markets.
Sure. Maybe as a kind of way to wrap the conversation here, Brian, we've covered a lot of ground, right? There's a lot of irons in the fire, to your point, 50 products across the portfolio. What excites you most as we kind of think about the next three, five, maybe even beyond the kind of 2030 type of vision for the story and really kind of what's ahead for Veeva here?
You know, a lot of the things that we've touched on, what keeps me awake is sustaining the culture and the operating model. That's really the secret sauce for Veeva. It's more of a bottom-up company than a top-down company because it's so wide. I get excited to see the momentum that we're having on CrossX and that that got to be the highlight that we talked about in Q1. A couple of quarters before, we were talking about EDC and the progress that we're making in EDC. I think in a couple more quarters, we'll be continuing to talk about CRM and all the top 20 decisions. It feels like every quarter we get to highlight a different area of the Veeva team that's working because there's so much great execution that's happening.
That gives me a lot of confidence as a CFO too because there's not one thing that this business is hinging on. It's a portfolio-level business and that creates opportunity, but it also de risks it. For me, the biggest thing that I think about that could go wrong would be if we lose that operating model. That's what I'm most protective of, but also what I'm most excited and proud of.
Certainly. Fantastic, Brian. Thank you very much for your time. Thank you, everybody, for joining us. We will be carrying on the conversation upstairs.