Veeva Systems Inc. (NYSE:VEEV) Q3 2024 Earnings Call Transcript

Veeva Systems Inc. (NYSE:VEEV) Q3 2024 Earnings Call Transcript December 6, 2023

Veeva Systems Inc. beats earnings expectations. Reported EPS is $1.34, expectations were $1.28.

Operator: Good day. My name is Krista, and I’ll be your conference operator today. At this time, I would like to welcome everyone to Veeva Systems Fiscal 2024 Third Quarter Results Conference Call. [Operator Instructions]. I will now turn the conference over to Gunnar Hansen, Director, Investor Relations. Gunnar, you may begin your conference.

Gunnar Hansen : Good afternoon, and welcome to Veeva’s fiscal 2024 Third Quarter Earnings Conference Call for the quarter ended October 31, 2023. As a reminder, we posted prepared remarks on Veeva’s Investor Relations website just after 1:00 PM 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, Veeva Commercial Strategy; and Brent Bowman, our Chief Financial Officer. During this 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.

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, December 6, 2023, and based on the facts available to us today. 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 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 form. 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 have solid Q3 with revenue and operating income ahead of guidance, including total revenue of $617 million and GAAP operating income of $235 million. As I shared in our prepared remarks, we had a number of great milestones and new product announcements in the quarter as we progressed in building our industry cloud for life sciences. With the growing set of high-value applications, data and services in R&D and commercial, we can help the industry become more efficient and effective across the even broader of areas. We have a significant opportunity ahead. And with a focus on product excellence and customer success, we’re becoming an essential strategic partner to the industry. Now I’ll open up the call to your questions.

See also Best Value Stocks? 15 Stocks Dr Michael Burry Bought and Sold and 12 Brilliant Money Moves Baby Boomers Are Making in Retirement.

Q&A Session

Operator: [Operator Instructions]. Our first question is from the line of Ken Wang from Oppenheimer.

Ken Wong: Fantastic. My first question is for Peter, maybe Paul, at Investor Day, you guys talked about getting an emotional commitment from customers to move over to Vault CRM. It looks like you got two written commitments now. Maybe give us some color into what went into that decision-making process for these large enterprises. And what kind of signal do you think this might send to the rest of the industry that are potentially looking at Vault CRM?

Paul Shawah: Ken, thanks for the question. This is Paul. Yes, so we’re super excited about Bayer and GSK, probably everybody on the call have seen the press releases but we also have them join us during the keynote on the main stage at Europe Summit, which was last week. A super exciting survey. Essentially answered your question on the main stage, which was why did they select Vault CRM, and it came for them, it came down to something very similar, which was innovation. They’re thinking about the future. They are excited about the next generation of CRM. And for them, even I’ll paraphrase what GSK said because they said it very concisely, it was this idea that pharmacy is not a commodity, but it’s a stall problem, thanks to Veeva.

And with what that means is this is something that’s very hard. It’s difficult. It’s something that they’ve done multiple CRM implementations in us. And it’s not something they want to spend any energy on. They want a solution that works and that’s proven and they want to be able to innovate and look forward. So that, in a nutshell, is the reason it’s innovation, it’s looking forward. It’s building for the future. So we are super excited to have both Bayer and GSK talk about their selection.

Ken Wong: Got it. And then a follow-up for you, Brent. Just as we look at the billings number for the year, you guys trimmed at $40 million. Any way to help us segment how much of that might be the services piece, the FX piece. And I think you kind of mentioned there’s a little bit of some combination of duration and timing involved. But would just love to kind of understand what the moving pieces are that got you to that $40 million.

Brent Bowman: Yes, happy to, Ken. So about half of it is related to services, the services reduction we talked about on Investor Day. The balance of it is really split into a couple of buckets. One is on the proportion of quarterly billers versus new billers in our new business. So we had a higher mix of quarterly billers than we expected. And then the other portion of that is related to timing of deals. So some deals we expected to close in the Q4 time frame. Now it’s going to be early fiscal year ’25. And then to a smaller extent, there was some FX headwinds as well. So relative to our prior expectations. So those are the pieces of it, but the biggest portion of it was clearly services.

Operator: Your next question comes from the line of Brian Peterson from Raymond James.

Brian Peterson: So I’ll start with Brent. I think there’s been some debate in the past on how the services business correlates to subscription. Is that a leading indicator or not? I’ve gotten the question from investors. So I love any perspective you have on how we should think about the correlation between subscription and services.

Brent Bowman: Services, happy to, Brian. Services is not a leading indicator. And there’s a number of reasons. There’s timing of deals. There’s product requirements that are different between the type of product you’re buying, customer-specific requirements. So that’s not going to be a good leading indicator. And then on the subscription side, you have things like ramping deals and pricing and the like. So there a number of reasons why those 2 don’t rely correlate and you shouldn’t think of it that way.

Brian Peterson: Great. And maybe just as a follow-up, on working automation side. I thought it was an interesting part of the product announcements out at the Investor Day. How do we think about the ramp of that product any or thought process and what your customers are using today? Thanks.

Peter Gassner: I’ll take that one. Yes, a little — we’ll start the development of that next year in 2024. So I think that’s something you’re seeing from Veeva as a strategic partner. We have a lot of products across R&D and commercial data, software and services. So we’re a very strategic partner to our customers. So in general, once we know we’re going to do something, we let our customers know so that they can do long-range planning around that. So in this case, you saw us announce that before we have established a development team, for example, for it. So it’s very, very early and too early to say what the revenue ramp would be. In terms of what most of our customers are using, they might use Salesforce.com Marketing Cloud. They might use product from Adobe. Some of the smaller customers will outsource this to agencies. But those are probably the — those are the predominant products that are used.

Operator: Your next question comes from the line of Joe Vruwink from Baird.

Joe Vruwink: In years past, just in the 3Q period, I think Veeva has had a fair amount of visibility and inclination just on the upcoming year because of where big pharma customers stand in their budgeting process. I’m wondering if you can maybe compare current visibility on that FY ’25 revenue target versus what’s been the case over recent history. And then just related to that topic since Brent, you were calling out some variables on just billings and this year, how do some of those things you called out maybe start to influence the puts and takes going into 2025?

Brent Bowman: Hi, Joe. So we reiterated the $2.75 billion and the visibility that we have, every day you move forward, you have better visibility, and we have no less visibility than we had a year ago. So similar as we look out in front of us. And some things that to contemplate is we have some multiyear ramping deals that will contribute a larger amount next year. That’s something that comes into play. But we have a long runway for growth. Our visibility is not less than it has been historically, at least as good, and we’re confident in our ability to execute to the number.