And then what we’ve had is some brands in large companies that are small brands, pre-commercial brands, and they’re thinking, wow, I can — they have some freedom and latitude to go off and do what they do. And they’re getting this new data set, then, okay, we’ll go for that. We’re the hardest ones and what just takes time, the well, the big established brands, right? Because they have a motion, and it’s going and it’s working. Very reticent to disrupt that because they have a limited patent life of these products, and they don’t want to be risky in there. So that’s a little bit of color of what we’re seeing.
Stan Berenshteyn: That’s very interesting. I appreciate that. Maybe as a follow-up, just sticking with the marketing team here. You called out strength in Crossix. It seems it’s pretty broad-based on the prepared remarks. Is it just overall market growth? Or are you actually taking share as well here?
Peter Gassner: I believe we’re taking share, yes. What’s happened is we just continue to track record of customer success, just sort of grind it out all the customers are successful with Crossix, our data network for what we’re doing there is the largest and most applicable. So I think bring some boom times. There was a little more experimentation with other areas. Some people got their fingers burned a little bit. And I think that we haven’t. We haven’t burned anybody fingers. So customer success leads the way. I think that’s the main thing.
Stan Berenshteyn: Great. Thanks so much.
Operator: Your next question comes from the line of Brent Bracelin with Piper Sandler. Please go ahead.
Brent Bracelin: Thank you. Good afternoon. I was hoping to go back to the demand environment with a specific lens towards the SMB segment and then the top 50 enterprise segment. Can you maybe just compare, contrast what you’re seeing in SMB? Are there any green shoots there or not? And then also compare that with the enterprise top 50 segments, what are you seeing there relative to this year versus last year? Thanks.
Peter Gassner: I’ll take that one. This is Peter. The emerging biotechs, the small center of the segment is still a tough sliding there. This year, we saw a record number of companies get acquired and go out of business. And a small number of new companies were able to get escape velocity because of the funding environment, it’s tough, and it continues to be tough. And you never know when it turns around until it turns around, all you know is that it hasn’t turned around yet. Then in the top 50, I would say the feeling is just kind of a bit resigned that, hey, we’re in for this — there’s some global conflicts, there’s inflation, there’s IRA Act, but that hasn’t hurt us too bad yet, so we could just keep going. Also there’s — I think there’s a renewed focus on execution and long-term execution.
They’re really seeing that that’s important. I think there’s some excitement about the science as well. Like, for example, we have some really big brands now in the city area. That’s something that didn’t exist three, four years ago. And so that’s renewing people’s optimism like, wow, the science will lead the way. So it’s really different in the top 50 versus the emerging biotechs.
Brent Bracelin: Helpful color there. And then my follow-up is back to M&A. And the question here is fiscal 2025 is going to be a very important year in that cash flow could exceed $1 billion for the first time. You have $4 billion in cash. Just thinking through the philosophy on M&A, historically, it’s been around small technology tuck-ins, you’re a much bigger business, you got a lot more cash flow generating coming in every year. Would you ever think about maybe larger bolt-on acquisition to go after a new area? Just thinking through M&A a little differently given the size of the business today and outsized cash generation you’re generating now as well?
Peter Gassner: Yes. I can talk to the general philosophy of M&A. I think it’s no secret, I can just give you the formula. First of all, it has to make some business sense with the market. It has to be a market that we’re interested to go in, either it’s complementary or somewhat adjacent to what we’re doing. So that would be number one. It has to have a cultural fit with the company that you’re considering acquiring because otherwise, it just absolutely will not work. And 80% of acquisitions fail. But at Veeva, we’ve had all of our acquisitions succeed. So it’s this discipline. The cultural fit is a real thing, and it’s an indicator of many things, not that our culture is the best culture or whatever, but a company that doesn’t fit with our culture, it will not be a successful acquisition.
Third, you need to have a very clear product and organizational structure plan that’s been thought out ahead of time so that you could announce it to both teams from the day you would acquire them. If that doesn’t happen, it’s an indicator that you don’t have enough bench strength to operate this thing. And therefore, you’ll lose it in the integration or the business strategy isn’t actually clear because you can’t say it to people. So in that, I think those are the parameters. So I don’t think we would be limited by size. If we saw something that was right that hit those parameters and that would cost us $3 billion more than we would go for that. But the other thing you need to is you need a willing seller. And so it’s timing of it. And that’s why 80% of acquisitions fail is because people rush in and they buy things that don’t fit these parameters.
We’re just not going to do that. I would rather return money to shareholders than wasted on a failed acquisition.
Brent Bracelin: Makes sense. Helpful color. Thank you.
Peter Gassner: Thanks.
Operator: Your next question comes from the line of Jack Wallace with Guggenheim Securities. Please go ahead.
Jack Wallace: Hey, thanks for taking the questions. Just wanted to go back to the guide and it seems like there’s been a lot of big momentum coming into the year. We’ve got some price increases. We’ve got some ramping deals. I think the pipeline is healthy of ruling buyers, timings made a little bit of a question mark. I don’t want to belabor the term prudent here, but it does feel like there’s more sources of potential upside in a higher floor of — whether it’s billings or subscription revenue that kind of media had coming into the year and that it’s just a matter of grinding out a handful of strategic wins in order to how to get to the high end or get above the guidance range. Am I thinking about that correctly?
Brent Bowman: Yes. So what I would say is I wouldn’t interpret the choice of words of prudent as there’s this incremental level of conservatism that’s baked into the guide. I guess I would start there. We’ve considered all the factors that we’ve talked about on the call today. And we’ve considered those and we think we have a guide that’s reflective of the best calls of the numbers like we have historically. So I would think of it that way. There’s a number of items to contemplate in like the services portion of the business, which can be a little bit lumpy at that business. But overall, we feel really good and have conviction on the numbers we provided.
Jack Wallace: That’s helpful. And then just on the 1Q guidance, was there any lingering impact from rep reductions that over the last couple of years just impacting 1Q? And then just on the I think the third one here, the services. Just seems like you’re taking a more aggressive approach there. I’m just wondering how much kind of automation potential that play to help improve the CRM migrations? Thank you.
Brent Bowman: I can take the first portion of that on the — on your question around rep reductions. There’s — the digital portion of those rep reductions, that’s largely behind us. So there’s I wouldn’t think of that as an incremental headwind as you look at fiscal year ’25.
Jack Wallace: Got it. Thank you.
Brent Bowman: Okay.
Operator: Your next question comes from the line of Karl Keirstead with UBS. Please go ahead.
Karl Keirstead: Thank you, Brent. Could we talk about your decision to raise the operating income guidance for fiscal ’25. To me, that’s meaningful a number of software companies seem to be going the other way where against the backdrop of needing to lean into R&D, invest in AI, they’re posting somewhat shinier margin upside. But you’ve raised it to a pretty high 30s level. Can you talk about your calculus there?
Brent Bowman: Yes, I’m happy to. So maybe just first taking a big step back, so we provided $1 billion plus guide about a year ago, which is a bit not typical, and we wanted to provide some context around the TFC standardization. So now you fast forward 12 months, and from that, we’ve been executing well, right? We’ve been executing over the past year. And the 39% reflects that. And that reflects our operating model and the efficiency and effectiveness we get out of our operating model, and also the power and efficiency of the Vault platform. So it really comes down to that. We’re making the investments we see are necessary to drive customer success and growth. We’re not short changing those. And — but overall, it’s just about execution.
Karl Keirstead: And Brent, maybe as my follow-up — I’m sorry, are we going to say something?
Peter Gassner: Yes, I would just say we’re — this is Peter. We’re — as we scale, I think we’re getting a little more efficient is getting more efficient in our processes, in our customer relationships and our use of our Vault platform, and we’re being diligent. That was a concept we call lean teams. Not doing layoffs, but we want lean teams. We want the smallest teams possible with high-performance people that could perform well together. So this kind of discipline that’s why our margins are increasing. And I think you’ll see that from us increasing margins over time.
Karl Keirstead: Got it. Okay. Helpful. And then maybe as a follow-up, if we could just go back to the optimism comment. It sounds like both of you, Peter and Brent are dissuading us from thinking that, that increased optimism would have any real impact on revenues and billings this year? I think we’re hearing that message. But if I could just press, why not, if your clients are getting a little more optimistic, could projects that might be stalled start to move forward discretionary spend start to come back. Why not?
Peter Gassner: I think most of these things that we deal with, we have very little discretionary stand other than in services, right, because we deal with these critical systems and complex system and they have more thinking time. They have — they have more thinking time. So I just don’t think it’s stuff that would impact this year. And having said that, we don’t know what’s going to happen this year. We do live in some uncertain times. We have some interest rate things going on. We’ve got two global conflicts going on. So we have to figure that uncertainty. Again, it’s not a guarantee that in September, everything is going to be the same as it is right now.
Karl Keirstead: Got it. Okay. Thanks for that color.
Peter Gassner: Okay.
Operator: Your next question comes from the line of Ryan MacDonald with Needham & Company. Please go ahead.
Ryan MacDonald: Hi. Thanks for taking my questions. Maybe first to start out with CRM. I noticed the nine wins in the quarter and even mix of 5 Volt and 4 Veeva CRM. Just curious what you’re hearing in terms of the rationalization from customers on still selecting Veeva CRM. Is it something that they don’t want to wait until April of ’24 to be able to do so or anything like that? And then is there — are you contracting in a different way now for Veeva CRM versus Vault, whether it be duration or putting in commitments to migrate over to the new CRM. Just any color there would be helpful?
Paul Shawah: Yes, Ryan, I can take that. This is Paul. So the conversations we have with all of these customers, it’s a dialogue. We go in with full transparency. We talk about why they want to choose one or the other. We don’t go in with a preconceived notion. We listen and talk to the customer. And then based on what their requirements are, we guide them. We try to lead the customer and make sure we make the right decision. There may be reasons to do Veeva CRM that includes some very specific features and functions that they really need early on that they want to start there with that would be a common example of why they may choose Veeva CRM of Vault CRM, but those things are going away quickly. Just to give you a perspective, we’ll be a general availability in April.
We’re well on the way and on track for that and at full parity with everything in Veeva CRM will be in Vault CRM by the end of this year. So it’s really a timing issue. And starting in April, everything will be Vault. And we’re comfortable and confident in that time line and that milestone. So that gives you some guidance there. In terms of the — how we’re contracting, we’re contracting in a very similar way. There’s not really a material change. So the licensing is not exactly the same, but it’s very similar. And then in terms of timing of contracts, it’s pretty much all the same, annual deals that we do, and it’s all per user base.
Ryan MacDonald: Super helpful. I appreciate that. Maybe a follow-up on the data strategy. Obviously, early days with the new prescriber national data available now. But one thing we’ve seem to have picked up from other vendors in the data space is that there’s sort of this constant need for it, whether it be maintenance or additions to grow their data sets over time to remain competitive and maybe those are vendor-specific issues. But I’m curious now that you’ve got prescriber and national rolled out in addition to patient, how you’re thinking about sort of that data expansion or acquisition strategy moving forward, whether that’s organic or if you — and you license it from other sources or maybe M&A makes sense. Just curious how you’re thinking about data expansion strategy moving forward.
