Welcome everybody. My name is Stan Berenshteyn. I cover healthcare technology at Wells Fargo. With me is Paul Shawah. He is the EVP of Strategy, and Gunnar Hansen, he's the Head of IR. Welcome.
Thank you.
Paul, maybe before we begin, you want to just give us a quick overview of what's happening, and then we'll dive into some questions.
Yeah, sure. Sounds good. I'll give you a brief overview of Veeva. Veeva, we're building the industry cloud for life sciences. That means applications and agents and data and consulting, specifically for the life sciences business. Our business is spread across two primary areas: R&D and commercial. R&D is a little bit of the larger portion of the overall business, and within each of those areas, we have suites of products and software products and data products and agents. That includes in areas like R&D, clinical, quality, regulatory, safety, and then in commercial, a number of different areas from core CRM, commercial content, a number of data products that we call Data Cloud. We're helping to make the industry more efficient in how we operate.
We're a public benefit corporation, so we serve the life sciences companies, the people in them, but also we're trying to advance the overall industry. We're relatively early on our journey. Each quarter, we make more progress in terms of building the industry cloud and the adoption of that. We're excited. We have a lot of opportunity and runway, particularly now with our focus on building agents for the industry.
You've been around for a while, and you've started out as purely a CRM for life sciences. You've broadened that out into the R&D clinical cloud. You've then tacked on data solutions. Where the company sits today, there's been a lot of change over the last, I guess, 12 months or 24 months. What are you most excited about right now? What has your attention when you go into work? What are you working on?
Yeah. Our vision is broad. It is this industry cloud, and that means building these suites of applications that all work together. The core enterprise software, the core data, and business consulting, that all works together. The major shift that's happened over the last couple of years is now this agentic layer, which is super exciting, and I think this is a core part of Veeva's advantage, a structural advantage in having the foundation that we have in the core enterprise applications, but also the agentic labor that will work interoperably with the core applications. We're just in the early stages of building that out. We've announced a broad AI strategy, AI in all of our applications. We call that Veeva Vault AI.
You've probably heard us talk about something called Veeva Falcon, and Veeva Falcon is the agentic labor that actually does work, and that works very closely with the core application. I'm excited about continuing to expand out the industry cloud, these suites of applications, but also AI enabling the industry. We're in the early days, but super promising, just really over the last several months, seeing the excitement and progress with the product, but also excitement and demand from the customer side.
If we can unpack the AI product suite a little bit, and maybe layer that into the discussion of revenue. You have given a 2030 target, I think a year or two ago, of hitting $6 billion in revenue by 2030. First question, is AI in any way part of that target, or is that a layer on top of your longer-term targets?
Yeah. That is right. We gave a 2030 revenue target about two years ago, and that is a $6 billion target. AI is largely incremental to that. When we gave that target, it was largely the existing products that we had and with maybe some additional growth of products, and primarily life sciences. Think about it as life sciences, core enterprise applications. Things like agents and Veeva Falcon would be incremental to that. Also, areas of our business, like in horizontal markets that we are entering, that is also incremental.
When we have had discussions with your customers, they have basically said, "Look, AI is new." You have just launched a bunch of AI products this year, effectively. A lot of these are early adopters. They are using these products, but they are not necessarily paying for these products. If we start thinking about the monetization of AI, what do you, I guess, envision happens in terms of monetizing it? Does this become an unlock next year? To the extent that it is, what are the monetization models that can potentially drive the revenue here?
I alluded to our overall AI strategy, and I will reference that again because we think about monetization very differently in different parts of our AI strategy. There is Veeva Vault AI, and again, that is AI in the core Veeva Vault applications. It is in every Veeva Vault application there is across CRM and commercial content and regulatory quality, clinical safety. Every area will have Veeva Vault AI enabled in the application, and that is AI to help the users of the applications, help them go faster, make better decisions, summarize things faster. It is making users more efficient. In most cases, that will be more consumption-based, based on just token usage. As we increase adoption and utilization, we will expect to see additional monetization there. Then there is Veeva Falcon, and Veeva Falcon is the agentic labor. It is the layer that actually does the work.
In a sense, it replaces humans and users, and that's the user of the application, and we expect in those cases it to be more outcome based. So based on, let's say, number of documents processed, as an example. A specific business transaction I could also anticipate in Falcon we may have more enterprise license agreements. We may shift to a model that's more based on ELA. That is something we're still early days, we're working that out. Part of what we're doing with early adopters is establishing value for the products. Our main focus, maturing the products, establishing the right value proposition, and then we think the right licensing model will follow. We may end up having, in all likelihood, multiple licensing models based upon the specific use case, based upon the type of AI that a customer's using.
If we think about the way that AI is monetized, right? There's, I guess, multiple vectors of value extraction. Gunnar, do you want to maybe comment on how AI can be monetized? Is it just a cost arbitrage or is there something else that can be involved here?
Yeah, we get questions all the time of what use cases we're looking to solve for with things like Falcon. The reality, as Paul mentioned, is that it's going to be very use case specific. There are certainly areas where we can help drive more efficiencies and potentially reduce some of the labor that's being done or used for some of these processes. But there's an element of getting things through the process faster, and that means getting to market faster. So there's both the cost arbitrage element, but there's also the ability to monetize and get to market faster. I think our focus in the interim with AI is really about getting AI out the door in the hands of customers delivering value. If we can deliver on that, we're confident in figuring out the licensing model, and the revenue should follow thereafter.
Can you give us some examples of how can you get a drug to market faster using Falcon as an example?
Yeah. One example and one of the areas we are focused on is in the regulatory side, health authority communication. When you are going through the drug approval process, the regulatory authorities like, let's say the FDA in the U.S., will have questions about your process. When they ask a question, they generally stop. It puts a pause on the approval process, and you have to respond to those questions. That does not only happen in one country. It may happen in multiple countries, in different regions, in different parts of the world. You have to answer those questions consistently and accurately. Today, people answer those questions. They formulate the answers. They may do translations. They may make sure that it is consistent, and that slows down the approval process.
If you can condense the time to respond to those health authority questions, what you are doing is you are getting the drug approved faster. You may have more time in market. When you think about, let's say, a potential blockbuster drug, a drug that has the potential to be over $1 billion in sales, getting that into market 30 days or 60 days or 90 days faster can be millions and millions of dollars to the life sciences company. One, it can get that drug to patients that need it sooner, but it also creates a significant revenue opportunity. To Gunnar's point, yes, you are reducing labor. Yes, you are shifting labor from people over to agents. More importantly, you are having an impact on how fast can I get that drug into the marketplace.
Okay. Falcon, as you point out, is an AI that is replacing labor. We know that CROs are a labor-heavy industry, very necessary to conduct drug trials. You rely on CROs. Where does Falcon sit? Is Falcon displacing CROs at all? Is it displacing something else? Obviously, headcount is being displaced. Where is that headcount coming from, and how are CROs in that picture?
Yeah, it is very broad. If you think about the use cases we are focused on with Falcon, it is everything from the commercial side of a company, so things like commercial content process where CROs play no role at all, to certain areas in R&D like safety, very minimal role. In clinical, to some extent, there is a role they play, and oftentimes that is work that is done by the sponsor themselves directly or other types of service providers. I think it is a relatively narrow place that may impact CROs, and it actually may be good for CROs over the longer term as CROs may be customers of Veeva.
We are not focused on that part of the market yet. We are focused on directly selling into the sponsors. They sell a portfolio of services, and this could be labor that they provide. I think we will see how that plays out over time.
And maybe one final question related on AI. Maybe there is more, I cannot promise. But if you think about the customers that are using AI right now, the products that you have rolled out, I know Falcon is still up and coming. Can you just talk about how the reception has been? Are they using it? Are they using it more intently? Do they say that, "Okay, this is very valuable to my workflow"?
Yeah, all signs so far, and we do have a number of customers using AI from Veeva in its different forms, the things that I talked about, Vault AI in the core applications and CRM and our commercial content business. And also Falcon MLR, we have a bit of a head start there that came. It started as an acquisition with a company called Compli, where they are using agents for the review and approval process of commercial content. Somewhat early days, but the reception has been great. We are seeing increased utilization, increased adoption. And I think we just had our first top 20 pharma company start small and expand to their U.S. field force for using our agentic call report in CRM.
We are excited about all of the early signals, and we are excited to kind of continue to expand that out over the next several months as we get more and more early adopters and more and more agents in the market.
Okay. I want to talk about some other areas of your portfolio. Maybe we will pivot here to R&D and Clinical Cloud. In recent quarters, you have described that more of your mature products are, because they are more mature, they are kind of slowing, and then you have these other more nascent products that maybe have not really reached the S-curve of adoption. How should investors think about the dynamic between the maturing products and the time lag between when these more nascent products can start to accelerate and maybe show up in the numbers?
Yeah, maybe to level set a little bit, just so people understand, we have those core markets that I talked about, clinical quality, regulatory safety, and they are all suites of products, and they all have a portfolio of products, some which were started many years ago and that have become more mature, and some which we have started over the last couple of years. In all of the cases, they are either really significant markets, some are smaller add-on type products. There is just a broad mix across all of those different areas. We have called out historically a handful of those that have contributed a significant part of our growth over the last several years. They will continue to contribute. They are not completely sold out. Those products are not going away. We do not have 100% adoption of all those products, so they will continue to contribute.
But there is also a number of products that we have announced over the last handful of years, and we have called out some of the larger ones, EDC, Safety, RTSM. Probably many of you know this industry well. You know a lot of those acronyms. eCOA is another example. They are in the earlier stage of that ramp. The ramps do not necessarily line up perfectly. The ramp, the S-curves do not line up exactly perfectly, but we have called this out as something that we see that is happening, and it is a broad portfolio of products where we believe we have a unique advantage in all of them. The core underlying Veeva Vault platform. In general, we are replacing either legacy applications or we are becoming the standard. We are creating a market that did not exist before.
We have a very broad and strong value proposition by all these products working together, so we believe we have the right to win. We call that out, and we see some of that transition happening already, starting this year. So I think this is something we will see play out over the next several years as we start to see that transition fully take place.
Okay. You have also called out a $1 billion opportunity selling trial-based solutions, like trial-by-trial solutions through the CRO channel. Historically, you have been primarily an ELA type of business, where you get the enterprise contract and the visibility is there. You do not have that variability. Are you seeing traction in this new sales motion selling through the CROs? Can you just talk about what you are seeing, a level of excitement, and how you expect that to progress over the next couple of years?
It is an exciting opportunity for us. When you look at our revenue mix today, the majority of our revenue mix comes from ELAs, from larger companies. There is a segment of the market that tends to buy the technology that we have been talking about, everything from EDC to the trial supplies and RTSM. They tend to buy it more trial by trial. We are approaching that market more cohesively in terms of how we position and sell the suite of products to that segment that buys for the trial, but also in terms of the importance of the relationships that we have with the CROs. The CROs are not only a customer of Veeva, but they are also a really core partner, and they can be an important channel to entering that market.
Particularly for small and mid-size companies, they have an outsized influence in the decisions that those companies make. We are still in the early days. As they become more adopted, they have to shift over. Remember, they have been used to, in many cases, using legacy technology for a long period of time. They may have thousands of people that are very comfortable with the legacy technology. Even though we provide technology that may be better, significantly better, they have to go through that change management process to move their teams over to change how they position and how they think and how they interact. We are in that early stage, but it is great. It is a great longer-term opportunity for us to continue to sell through the CROs and to become the standard, hopefully across many, if not all, of the CROs over time.
Adding IQVIA was a really nice advantage. They are one of the largest CROs, as you know, and we are in the early stages of starting to see some of the benefits of that partnership play through.
Now it seems like all of the top CROs are channel partners, potentially for you. You are saying you have to have the sales motion, these people have to be trained and understand how to maybe position Veeva as part of the sales discussion. What is going on right now? When a trial sponsor goes to the CROs, is it just they declare who they want to use for their software, and that is basically what the CRO does? Or does the CRO actually have a preferred vendor that they recommend? Can you just take us through what is actually happening right now, and how do you expect that to change?
Yeah. In some cases, the sponsor themselves would make a decision on the core technology, and in other cases, particularly the lower and smaller end of the market, the CRO would make a recommendation on the technology. We're in different stages with different CROs in terms of some have standardized, and they tend to recommend Veeva as a standard, and others haven't yet, and they may do it more surgically or precisely. Our expectation over time is that more and more CROs adopt the best technology in Veeva as the standard when they do their proposal. That's a journey. That's something that takes a long time. We don't take that lightly. It's on us to make sure that we continue to have the very best products, technology that will help them deliver more effectively, deliver more efficiently. That's what they want.
They want to look to a provider and a partner who can help them provide their services more efficiently.
Now, prior to the relationship with IQVIA becoming aligned commercially, I think historically you've butted heads, so to speak, and IQVIA's data solutions were not allowed in your platform.
Right. That has obviously changed. What does that mean for certain add-on products that you have related to data, and what does that mean for your own data product, which effectively competes with IQVIA and continues to compete? Is this now a headwind that IQVIA can be integrated as a tailwind? Can you unpack that for us?
Yeah. It really helps both areas. It is good for IQVIA and Veeva. It is great for the industry. Historically, our customers were not able to buy some of our software products because they had standardized on IQVIA data, and it was not going to work. We actually stopped selling some of these products in different segments of the market. Now we are ramping that up. We are building connectors between our software and IQVIA data. We are able to create more value. They can continue to standardize on IQVIA. They can use Veeva software now, and master data management is a good example of that. Master data, you master customer information, and they have a lot of that customer information. We are able to work together. That market, we are kind of restarting. We are kickstarting that market again, and that is a nice opportunity for us.
It is a nice add-on that we were not really selling, and now we can continue to sell. From a data perspective, there are areas where we compete, and we will both compete respectfully, and customers may make a single-source decision, but I think what is also common is customers make more of a dual-source decision, where they may have picked either IQVIA and other data providers or Veeva and other data providers. Now they just may pick Veeva and IQVIA together because our data is able to work well together. I think it does create an opportunity for both companies to become more of that standard for data sourcing, rather than relying on one in a portfolio or a set of niche data providers.
Okay. I did say I am not going to ask an AI question, but I am going to renege on that. I am going to ask another AI question. From a margin standpoint, I think historically, maybe a quarter or two ago, maybe you have said that AI margins are going to be between services margin and software margin. Now that your thinking has evolved on this, where do you think the AI margins can actually get to?
Yeah.
Yeah, I think it is still a little bit early, quite frankly. I think Peter made some comments more recently on the call about how Falcon margins may be more comparable to our subscription margins. I think we will have to see how that plays out, but I think the underlying assumptions there was with Falcon, the ability to use more deterministic software for certain parts of the process, and then secondarily, to the extent that you see a reduction in token cost over time. Because of the value we are delivering and because of those two points I just made, margins may be more comparable to our subscription, but again, it is still pretty early days with Falcon. I think we are expecting to have our first customer go live later this year, and our first top 20 to go live in the first half of next year.
We're really excited about it, but it still is a little bit early days, certainly when you think about the margin profile.
Okay. Let's pivot to the CRM side of the business. Within the top 20, you're now at 12. I think there's been six confirmed takeaways by Salesforce. There's two outstanding to be determined. That's pretty much already settled. We'll maybe talk about win-backs in a second. But outside of the top 20, can you just talk about what's your win rate there, what's your traction there, and how does that compare to Salesforce?
Yeah. The win rate is very high. You've heard us talk about where we are on top 20. There's only two decisions left, and the two outstanding in top 20, we're making a lot of progress on both those, so we feel really good there. But outside of top 20, we're winning the vast majority. This includes really two groups. One, it's companies that are on Veeva CRM that are making a decision to migrate. We win the vast majority of those decisions. In addition to companies that are selecting a CRM for the first time. These are net new logos, companies that didn't have anything, in many cases, before, and they're choosing Veeva for the first time. We've said our win rate in both those areas is over 80% this year. That remains the same. That's unchanged.
We've also, just to frame the whole thing, where is this whole thing going to land? We've talked about over 70% market share in the CRM space is what Veeva will retain over time. The market's spoken. It's very clear. We are the market share leader. We will continue to be the market share leader.
And just maybe tying in this recent quarter, Core CRM was really strong. It seems like it is a legacy product. Why was this quarter actually a strong quarter for Core CRM?
Well, it includes what we are doing with Vault CRM. In fact, we said it was our best quarter ever in CRM, and this includes decisions from some top 20s and some large enterprise customers, companies like Lilly and Biogen and Regeneron have made decisions to continue with Vault CRM. And then we now have over 180 customers live on Vault CRM, so more migrations done successfully. We have gotten the migration process down to a science. These are on time, these are on budget, they are very efficient, so we have executed really well in the migrations. But it is also in the product progress. We had our first top 20 go live in all of the U.S. market with the agentic call report in Vault CRM.
So we have talked about the promise of AI in Vault CRM, and now it is becoming a reality with some significant companies.
We expect more and more of that as companies go live on Vault CRM. We expect some will turn AI on day one. That has always been the promise of more innovation, and it is becoming a reality. So we are just executing well on all cylinders in CRM.
And within the top 20, Salesforce did have six wins. What gives you confidence that maybe some of those are going to come back to you? And if that does happen, do you have some kind of line of sight of potentially when that could happen?
Yeah, we've talked about that for a number of quarters now. We do have confidence and conviction, and I think what's becoming more and more clear is, as more time passes, there's more evidence that supports Veeva's execution compared to what's happening on the other side. Salesforce, a number of projects have been struggled, they've been delayed. On the Veeva side, we're executing, as I've talked about, getting customers live, getting them to turn on new innovation. We are in discussion with all of these customers, these companies that have made a Salesforce decision. They're very significant and meaningful customers of Veeva across many different areas. We stay close, we're working with them, and that's what gives us the confidence.
The difference in execution with Veeva versus what they're running up against in Salesforce, and as more and more time passes, that becomes more and more clear to the overall market.
On the CRM front, you've recently introduced Aspen CRM, which is your pursuit of the horizontal app strategy you've called out previously. I guess, what do you think gives you the right to win in the horizontal space? CRM is a very crowded market, highly competitive. Can you just lay out your strategy and your vision here?
Yeah, sure. It's a very significant market, which I think speaks to the fact that it's crowded and there is a lot of competition. I think there's still a big opportunity to do CRM really well. I think historically, if you look back at the ROI that companies have, the investments they've made in CRM have been disproportionate to the ROI that they've achieved. We think we can do something that's better, it's faster, it's cheaper. Like a CRM that you can get up and running very quickly, that you can get a lot of value from. We would love nothing more than companies to say, "Hey, I love my CRM system. I'm getting all the value that I had anticipated out of that." That's uncommon today, and we think it's uncommon but unnecessary also.
Our opportunity is not only to deliver the next generation of platform and technology, but also to be a more friendly company, a more transparent company, to be easier to do business with, and you see that even on the website. It is just very clear what our licensing model is, how it is going to be. It is super transparent, and we want to do that from a partner and a company that people can trust, which Veeva has earned that right for sure in the life sciences industry. We think we can do it horizontally also.
Okay, and your CRM business, it is about 50% of your commercial cloud business. Commercial cloud obviously has Crossix, has Data Cloud, has all these other products, I think PromoMats, MedComms. If we think about this other bucket outside of CRM, what are you excited about there? Where are you seeing traction and momentum in the business?
Yeah, first and foremost, Crossix has been a very strong performer. After we made that acquisition about six years ago, we have continued to make investments in a lot of their products. Those investments are paying off. And the products also in the go-to-market, focusing on broader segments of the market. From a product perspective, it is measurement and audiences. We made huge investments in audiences. We have become the market share leader, the very best product in measurement. We are doing the same in the audience side. So we are increasing share in that part of the market. So Crossix has been a very nice and strong and will be a durable grower over many years to come, particularly as digital becomes more of an important channel to the market, a way that companies are investing in new digital engagements. They need to measure that effectiveness.
Beyond Crossix, we have seen strength really in all parts of the business. Commercial content, we are the established market share leader, but we are also innovating there, and Falcon MLR is yet another layer to that. Connecting the agentic layer that does the review and approval process with the core underlying enterprise application, big advantage for Veeva. So I see that as a continued area of growth. And then in the data products, and Link has led the way from a data side. One of the first Link products was called Link Key People, and we have become the market share leader in that space. And there is a series of additional products that follow that are much earlier stage in the market, but we feel really confident in those. And then some earlier-stage products like Compass. Compass patient data, Compass prescriber data, very significant market opportunities for us.
These are markets that play out over a long period of time, but the early parts of the market, we're doing well, and we're getting those early customers. We're establishing the right to win in the broader market.
12 months from now, if you're back here, hopefully, and you're recapping the success that you've seen over the previous 12 months, what do you think would be the two, three things that you would highlight that really demonstrated that you've executed against your vision?
Yeah, I think it will continue to be broad-based. I think you'll hear me talk about Crossix again. I think you'll hear us talking more about the agentic layer. What we're doing with Falcon, and Falcon MLR is the one that's available today. There may or may not be more in the commercial space. I think you'll hear us talk about continued progress in data. Every quarter that goes by, we're making more and more progress from a product perspective, but also a market adoption perspective. I think it will be more of the same and maybe even some new announcements.
That'd be great. Awesome. Well, thanks so much. Thanks everybody for joining us.
All right. Thanks, Stan.