Veeva Systems Inc. (NYSE:VEEV) Q4 2022 Earnings Call Transcript

Veeva Systems Inc. (NYSE:VEEV) Q4 2022 Earnings Call Transcript March 1, 2023

Ato Garrett: Good afternoon, and welcome to Veeva’s Fiscal 2023 Fourth Quarter and Full-Year Earnings Conference Call for the quarter and year ended January 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 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, March 1, 2023, 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 update in 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.

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Peter Gassner: Thank you, Ato, and welcome everyone to the call. We had a strong finish to the year with results ahead of our guidance for the quarter and year. Thanks to great execution by the Veeva teams across all areas. We’re early in the significant industry cloud opportunity, and we are executing well. It was a breakout year for clinical data management, and we saw a great traction in newer areas such as Safety, Link and Compass. Our innovation engine is strong and our strategic partnerships with the industry are increasing. We issued guidance for fiscal ’24 and initial guidance for fiscal ’25 to provide context for the one-time revenue impacts to 2024 related to TFC. Normalizing for TFC and FX, we expect revenue to grow about 15% in fiscal ’24 and at least 15% in fiscal ’25. At this point, we’ll open the call to your questions.

Operator: Thank you sir. We’ll go to Brent Bracelin, Piper Sandler.

Brent Bracelin: Good afternoon, Peter. I really appreciate your kind of long-term thinking here. And so this one is kind of aimed squarely at you here. I would love to get your initial thoughts on how Veeva is thinking about incorporating AI and large language models into the business. Is there an opportunity to lean in here to either lower cost internally around AI? Or are you thinking about new revenue streams via new products that you could build on kind of these AI advances in large language models? Thanks.

Peter Gassner: Hey, good question about AI. Well, certainly, ChatGPT kind of taken the world’s imagination by storm, and it is a significant type of technology. I won’t go too long into that, but it’s significant. But to answer your questions, Brent, I don’t see any opportunity to really lower internal costs, most of what we do is relationship based and the selling and the marketing and innovation base, true innovation base and construction in the product area. So I don’t see anything there. As far as for value for our customers, that’s something we’ll consider over time. We won’t rush into it. We have a lot of data in Veeva in the industry cloud overall for the industry. And then we have data — we have our customers’ data for each customer.

So there’s potential that we can do some things to answer some questions about the industry overall, for and/or help the customer answer some questions about their internal operations. And I do think the large language models are going to be, I think, in the chat type interface. Ask about a question, get a relatively low quality answer that you can kind of move forward from for there. So I think there’s a place for it. I don’t think it’s a revolution, and we’ll just see how it goes.

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Q&A Session

Brent Bracelin: Helpful color. And then one quick follow-up for Brent. Really appreciate the initial kind of milestone for fiscal 2025, here implies a rebound to 19% overall growth. In our forecast, it does suggest that the R&D business could rebound and normalize back to 25%, 30%. Is that the right way to think about the drag in R&D and this year and then kind of a normalization in R&D growth the following year. Is that the right way to think about the impact here with accounting shift?

Brent Bowman: Yes. So, thanks, Brent. We’re really excited about the momentum we’re seeing in the R&D business. It’s a key obvious growth driver for us as we look out ’24, ’25 and beyond with particular strength in the clinical space, quality, so really broad-based strength. So, it is really driving that growth that you’re seeing as you look out into 2025.

Brent Bracelin: Okay. Thank you.

Operator: Next up is Brian Peterson from Raymond James.

Brian Peterson: Hi, thanks for taking the question. And so, I wanted to hit on your success in EDC with six of the top 20 customers on the full. Maybe talk about what’s driving that success, and then I’d love to understand, Brent, maybe how to think about the revenue ramp of those deals? Like how long would those typically get to be fully up to like the fully penetrated ARR?

Peter Gassner: Yes, I can take those. This is Peter. We’re really happy with the success of EDC. I guess sometimes things come in bunches. And three of the top 20 in one quarter, I wouldn’t expect that every quarter, because we’ll run out of the top 20 very quickly, right? It happens like that. Why is it happening? Why did it happen all in the same quarter? That’s a series of coincidences really. But why is it happening overall, and we’ve been saying this for many years, it’s just a better EDC product, more complete, it’s true cloud and it comes from Veeva, which we have a clinical operations suite and a clinical data management suite. And that’s what customers want. These are long projects. So full revenue on some of these projects, you’re looking at sort of three to five years type of thing.

Now they’re not all the same, and so — and I’m not saying that some might not be two and some might not be six. But if you look at three to five years, that’s kind of a good thing to think about there. So it’s a long-term revenue.

Brian Peterson: Right. .

Peter Gassner: If I just add a little color, that’s the clinical — the EDC, that’s — there’s a lot more to the clinical data management suite too, that’s very significant over time. Randomization trial, supply management, ePRO, our clinical database and here will be more. So, I think you should think about EDC almost like you thought about eTMF as the start of our clinical operations. So, it’s big and significant, but it’s the overall clinical data management is even bigger.

Brian Peterson: No, that’s good to hear. And it sounds like there’s a lot of good news in clinical. And maybe pivoting to the commercial side, I know this was in the prepared remarks a little bit, but just in terms of the CRM transition to Vault, any early feedback that you can share from customers that you’ve heard? I’d love to get any perspective on that. Thanks guys.