Veeva Systems Inc. (NYSE:VEEV) Q2 2024 Earnings Call Transcript

Veeva Systems Inc. (NYSE:VEEV) Q2 2024 Earnings Call Transcript August 30, 2023

Veeva Systems Inc. beats earnings expectations. Reported EPS is $1.21, expectations were $1.12.

Gunnar Hansen: Good afternoon, and welcome to Veeva’s Fiscal 2024 Second Quarter Earnings Conference Call for the Quarter Ended July 31, 2023. As a reminder, we posted prepared remarks on Veeva’s Investor Relations website just after 1:00 p.m. Pacific today. We hope you have had a chance to read them before the call. Today’s call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer; Paul Shawah, EVP, Commercial Strategy; and Brent Bowman, our Chief Financial Officer. During the call, we may make forward-looking statements regarding trends, our strategies and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties.

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Our 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. Forward-looking statements made during the call are being made as of today, August 30, 2023 based on the facts available to us today. If this call is replayed or reviewed 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 may discuss our guidance on today’s call, but we 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 may also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results.

A reconciliation to comparable GAAP metrics can be found in today’s earnings release and in the supplemental investor presentation, both of which are available on our website. With that, thank you for joining us, and I’ll turn the call over to Peter.

Peter Gassner: Thank you, Gunnar, and welcome, everyone, to the call. We had another strong quarter, delivering results ahead of guidance, including total revenue of $590 million and non-GAAP operating income of $212 million. In commercial, I’m excited about our first Vault CRM customer win and planned general availability date in April 2024. That’s really strong progress by the Veeva team as we deliver the next generation of CRM. We also saw great activity in clinical, both with our established products and our newer products in clinical operations and clinical data management. At this point, we’ll open up the call to your questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Joe Vruwink with Baird. Your line is open.

Joe Vruwink: Great. Hi, everyone. I guess I wanted to start with the news this week on Vault CRM signing its first new customer. Really the question with the go-live later this year that does strike me as a bit earlier of a timetable. I think in the past, there was talk of 2024, maybe ahead of the Summit next year. So, if I’m right on — maybe this being a bit earlier of a timetable. Just any views on why that might be the case? And then, does that at all influence kind of how you think about launch and strategy progressing from that point onward?

Paul Shawah: Hey, Joe. Yeah, this is Paul. Thanks for the question. So, yes, we’re certainly very excited to announce our first customer win. This is an early adopter. They will go live, that’s the plan, in in Q4 of this year. It is a little bit earlier than we had expected. But Vault CRM is progressing really well. The product team has really delivered with excellence over the last year since we announced Vault CRM. So, we’re excited with the progress. We’re excited where we’re headed. In terms of the timing, it’s generally in line with what we talked about. So, we’ll look at new — all new customers after April next year. So that’s what the general availability date means. We’ll have our first migration starting in 2025, and we’ll expect to migrate most of our customers in 2026 through 2028. So that fundamentally doesn’t change that much. But yes, you’re right, it’s a good indicator of the progress we’re making.

Joe Vruwink: Okay, that’s great. And then, just pertaining to the strength in EDC with the wins this quarter, and then really the highlighting of the broader clinical data management strategy in the prepared remarks. When you step back and look at all of this, would you say really no different than what Veeva has now done several times over its history in terms of product leadership, lighthouse account wins, and then building out the suite? Or just given the size and consequence of this category, would you maybe start highlighting different things in terms of strategy, the consequences going forward about your clinical data, specifically?

Peter Gassner: I’ll take that one, the broader clinical overall, which is clinical operations and clinical data management. They kind of — they go together. A few high-level thoughts. When we start a new product area, we always have plans and we always try to do our best. And sometimes we achieve those internal goals for ourselves and sometimes we fall short. I think in the clinical area, we probably exceeded what we — so far, what we thought we would set out to do. When we first got into our first pieces of clinical with CTM was really eTMF in 2012 and CTMS in 2016. So, we’re a bit ahead. And then, all product areas are important, but clinical is just a very, very big one. So maybe in that way, it’s a bit more important than others.

A long way of saying we’re really happy with our progress, and we’ve executed well. We’ve probably got some — I had some good luck along the way as well, and now we just really have to focus on our customer success, and we’ll do just fine.

Joe Vruwink: Great. Thank you very much.

Operator: Your next question comes from the line of Ken Wong with Oppenheimer & Company. Your line is open.

Ken Wong: Great. Fantastic. This first question for Brent. Just wanted to understand the moving pieces on the billing side. Exceptionally strong in Q2, held the line for the full year. Just wondering if maybe some pull forward, some realignments. Like, what drove those moving pieces?

Brent Bowman: Hi, Ken. It’s — yeah, I’ll take that one. So, from a full year perspective, we reiterated the full year billings guide. So, we’re growing at about 15%. What we’ve always said when you look at any one quarter, it can be — it can move a little bit. So, in Q2, we’re pleased to see some benefit from some linearity of some deals, so a little bit better deal timing. Those deals, we expected to close within the year, it just happened to close in Q2. So that’s not going to impact the full year number, but we’d rather have the business earlier than later. So overall, happy with the execution.

Ken Wong: Got it. Makes a ton of sense. And then for Peter, just you guys touched on SMB softness. I think that’s something you called out a year ago, but it did sound like it was more towards the commercial side when you first called it out. Would you say you’ve seen any impact or more meaningful impact on clinical, or is it held roughly the same in terms of how that SMB exposure has weighed on the business?

Peter Gassner: Well, I think, we always knew that the macro would affect commercial and SMB, and particularly the smaller SMB, the emerging biotech, because when the funding environment is down, they might not be able to fund their clinical trials, get the money they need to expand. So overall, I would say, it’s playing out as we expected, and that’s — I don’t know when things would change. Who knows, right? They may change in the future, but you won’t know that until they change. Right now, it’s a business as we expected.

Ken Wong: Got it. Okay. Thanks for the color.

Operator: Your next question comes from the line of Rishi Jaluria with RBC Capital Markets. Your line is open.

Richard Poland: Hey, thanks for taking my question. This is Richard Poland on for Rishi. So, just one for me. On the China exposure that you called out in some of the prepared remarks, and you said that you kind of factored that into guidance. Just wanted to get a little bit of clarification on what exactly is factored into guidance on that side.

Paul Shawah: Yeah. Hey, this is Paul. I can answer that. Just a little context. I think it might be helpful on China. This is regard — in regards to some regulations that have come about over the last couple of years, which impact how data is transferred outside of outside of China, which starts to impact Veeva CRM. Veeva CRM is the predominant CRM that’s used for most of the multinationals in the Chinese market. So, what it’s doing is it’s forcing them to rethink their solution. We have a solution for them in the Chinese market. That’s our China SFA product. In terms of the size and the impact of this, this is not material. It’s all factored in, but it’s really not a material impact, either this year or next year. So, maybe that’s how to think about it.