Good afternoon, and welcome to the Veeva Systems Third Quarter 2013 Conference Call. All participants will be in listen only mode. (Operator Instructions). Please note, this event is being recorded. I would now like to turn the conference over to Rick Lund, Investor Relations Director. Please go ahead.

Good afternoon and welcome to Veeva's fiscal third quarter 2014 earnings call for the period ending October 31, 2013. With me on today's call are Peter Gassner, our Chief Executive Officer; Matt Wallach, our President; and Tim Cabral, our Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding our trends, strategies and the anticipated performance of the business. These forward-looking statements will be based on management's current views and expectations, and are subject to various risks and uncertainties. Actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our registration statement on Form S1 filed with the SEC on October 15, 2013, which is available on the company's website at www.veeva.com, under the Investors section, and on the SEC's website at www.sec.gov. Forward-looking statements made during the call are being made as of 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 will provide guidance on today's call, but will not provide any further guidance or update on our performance during the quarter, unless we do so in a public forum. On the call, we will 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, which is available on our website, and as an exhibit to the Form 8-K filed with the SEC just before this call. With that, thank you for joining us and I will turn it over to Peter.

Thanks Rick, and thanks to everyone on the call for joining us today. I am pleased to report total revenue for the quarter of $55 million, a 54% increase over the same period last year, and subscription revenue for the quarter of $38.9 million, an increase of 95% over the same period last year. We continue to grow profitably with Q3 non-GAAP net income of $8.3 million, up from $6 million a year ago. Our growth and profitability are indicators of the strong demand for our industry cloud solutions. Since this is our first earnings call, I will take a moment to provide some background and context on our model and market opportunity, along with a few customer highlights from the quarter. I won't name these customers, since they generally prefer we not cite them in this type of forum. We founded Veeva on the idea that industry cloud solutions would be the next wave of cloud applications. Many industries require software that is tailored to manage their most strategic business functions; they want to move to the cloud, but they can't use generic one-size fits all cloud offerings. So they are stuck on ageing client server industry specific legacy systems. Veeva provides industry cloud solutions: software, data and services, for the global lifesciences industry. Our customers include companies such as Pfizer, Novartis, Lilly and Amgen. Lifesciences is one of the world's largest industries at $1.6 trillion, and it’s growing at roughly 6%. It's also rapidly changing, and under intense competitive and regulatory pressure. Legacy client server systems often can't keep up with the pace of business and regulatory change. It's a perfect fit for industry specific cloud solutions. We are at the very beginning of a major technology replacement cycle with lifescience companies as they move from client server…

Thanks Peter. We are pleased with this quarter's results, which reflect the unique combination of strong top line growth, continued profitability, and positive cash flow. Before going into our quarterly results, I will provide a little color on our operating model, for those who may be new to Veeva. Industry cloud has some distinct benefits. Our industry focus has allowed us to build deep relationships with our customers, and they view us as a strategic partner. Understanding their biggest challenges and highest priorities, helps us know what to build, allowing for a more focused R&D spending, and an expanded portfolio of products, that are more likely to meet their needs. This results in growing customer lifetime value, as customers expand their use of our solution, and generate higher levels of success and referenceability. This dynamic lowers customer acquisition cost and drives more efficient sales and marketing. Let me now discuss how our revenue model works. Our total revenues include subscription services revenues and professional services revenue, which we will refer to as subscription revenue and services revenue respectively. Our subscription revenue is generated by selling annual subscriptions to our cloud solutions. Revenue is recognized ratably over the length of the contract. Our orders with new customers and renewal orders are typically one year in length. However, as our customers add more users across new divisions and geographies, we make these add-on orders coterminous with the customer's current renewal date. This means that we initially build these add-on orders for a period that is less than 12 months. Our services revenue is generated from the professional services that we provide to our customers, to help them implement and use our solutions successfully. Services revenue is recognized upon delivery and is build monthly in arrears. The primary objective of our services business,…

We will now begin the question-and-answer session. (Operator Instructions). And our first question will come from Jennifer Lowe of Morgan Stanley.

Great. Thank you. First, I want to ask about Vault, and it was great to hear a couple of the wins that you’ve had there. And what's sort of notable to me is, is that it sounded like both of those were on the R&D side of the house with the Medcoms and the eTMFs and I think historically, we have thought about Vault team, the greatest adoption on the commercial side of the house. So can you talk a little bit about what you are seeing in R&D with Vault? Are you starting to see more momentum there? Was it coincidental that those were sort of the two wins you called out, or are you really starting to see a pickup in momentum in the R&D organization as well?

Thanks Jen, that's a great question. And actually, your first question is great there about the Medcoms, because that is an area that some customers, in their internal areas, consider it in the R&D side, and some customers consider it in the commercial side. So we actually, as to probably the majority of customers, consider Medcom in the commercial side. So Medcom, who we have considered in the commercial side, and ETMF in the R&D side. And we are seeing good pickup in Vault across the board. We started our first product within the commercial side, with the promotional materials management, that was roughly two years ago, [where it became GA] [ph] and then in the last 15 months, we have introduced products on the R&D side with eTMF, with QualityDocs, with System Submissions, and also the Vault platform. So at a high level, what we are seeing for Vault, or what I am enthused about is, we have customers. We have over 50 customers that are doing their implementations. We see a pattern of customers adding more users and more products in getting real value out of the system, so that's very encouraging. What I'd say is, Vault is -- it has reached its escape velocity. We see that pattern. We know it’s going to be a big product, and we see that pattern, where it's going to go. We have implementations. We have a pipeline of seven figure -- some seven figure deals involved, that have active opportunity. So we are very happy about that, and that's one of these leading indicators that you see, and that's one of the things we saw in CRM also at the time. And then another really, thing that we focused on, is we have been working on Vault since the first line of code for over three years, and we are doing something unique. We are building a content management suite of applications on our own content platform in the cloud for a highly regulated industry. Nobody has done that before, and nobody is trying to do it. So we feel like we have a three year head start on anybody to do that, so there are some barriers to entry. And the market timing is right, overall because our customers -- this is a very critical area for them, and they want to become agile and move to the cloud. So we are really seeing this great activity, great early activity across the board for Vault.

Great. And Tim, just one for you. On the professional services side, last quarter, the growth there slowed. It looked it slowed a little further this quarter, and there are certainly a lot of factors at play there. Some of it is, the mix between upsell and new business, some of it is the business you are doing with partners. But, was there anything kind of notable on the quarter on either of those fronts or something different, and how are you thinking about that trajectory on professional services revenue going forward?

Yeah, so Jen, great question. On the professional services side, as you heard in my prepared remarks, we focus professional services for customer success, and quarter-to-quarter, you will see some variability for a number of reasons. In fact, if you think about one of the primary reasons that we see from a seasonality perspective, we are going to see that potential in Q4. There is a number of holidays, as you know, that will take away some billable days for us, and we saw a little bit of a dip between Q3 and Q4 of last year. We have incorporated that thinking and do the $57 million to $58 million of guidance, which we are very comfortable with, and we don't specifically guide on services revenue.

Great. Thank you.

And the next question comes from Nandan Amladi of Deutsche Bank.

Hi, good afternoon. Thanks for taking my question. Congratulations on your first quarter as a public company. First question is on -- actually, you have become a public. How has customer perception changed, particularly as you address some of your international markets? You talked about international revenue already being 40% of the global, but that's based on [States] [ph]. How about on the truly international side, where the companies are actually based outside the US?

Nandan, thank you for that. I think certainly going public has been good for us, and it has increased the visibility. But I don't think -- that hasn't translated into any particular change in behavior with our customers, and I would take, international or the US, in either case, it hasn't translated into any change in behavior. I think our customers appreciate it because as we become a more strategic partner, and as we get on our way to our mission of becoming their most strategic technology partner, that transparency of being in a public market is only going to be a benefit to us.

Okay, thank you. And a quick follow-up. On the add-ons, I know we have talked about this during the (inaudible). How is the trajectory trending now over the last quarter or so, with -- specifically, the CRM add-ons? And that has been a source of a lot of questions from investors?

Matt, why don't you take that one?

Sure. Hi Nandan. So the two CRM add-ons are close with marketing, and this is something that generally, almost all of our customers are using in one way or another across different geographies. The product is about two and a half years old. We continue to see it generally purchased along with the initial CRM projects now; where initially, it was something that was people adding on to an existing CRM, now we see it more and more as just part of the base of starting a project, and that's what we would expect. The attach rate of that product is right around two-thirds. So two-thirds of our CRM users are also using Veeva CLM, which was the first add-on. The second add-on is Approved Email. This is something that really didn't exist before, the ability for sales reps to send compliant emails to physicians and other customers and guarantee that they are going to get the right version of the right content, because of the integration that Veeva CRM product has with Veeva Vault. So it’s a unique product. It has only been out for a couple of quarters. We’ve signed our first few customers, Peter referenced more than a 1000-user deal, and the statistics are actually quite shocking. Where we all know, normal email open rates are in the 0% to 2% range. What our customers, two of them have reported back to us, one in Europe and one in the US, is open rates in the 30% to 38% range, and just have been a remarkable success for them so far. So, I think we are tracking as we thought. The product is having the impact that we are hoping that it would have on the efficiency and the productivity of our end users. And so, we think that over time, the majority of our users will end up using Approved Email also.

Thank you.

And the next question is from Brendan Barnicle of Pacific Crest Securities.

Thanks so much. Peter, in your comments, you were reminding us of the low penetration that you have at some of these big customers, and the big opportunity that remains there. Is there any way of giving us a sense of what your average penetration is within the customer base, of that sort of kind of the global 500 pharma, the big pharma opportunities?

Matt, do you want to take that in terms of penetration into CRM/

Sure. Hey Brendan. So we've talked about penetration, let's define the base CRM product as the way that we would talk about it, because it gets confusing if you talk about add-ons and altogether. So for the base CRM product, when we think about the high end of the market, you mentioned 500 companies. We measure in track, kind of the top 50 pharma companies. So if you look across the top 50 global pharma companies, at all of their pharmaceutical sales reps, we penetrated roughly one third of those users. And this is great, because with the successful projects, we are able to expand, not only to the other two-thirds within that market, but then into all of the CRM add-ons, and we have already started to see a lot of opportunity to expand beyond CRM, with the Vault and Network product lines, and that's really based on the customer success of those first projects.

Great. Peter, you guys have a long ongoing relationship with salesforce. You mentioned the salesforce platform. If for some reason you decided you wanted to move to another platform at some point, or something changed in your relationship with salesforce, how difficult is that transition on that CRM product?

Okay. The salesforce.com platform, and just to add to Matt's answer there, one of the great things about -- it’s a great thing when we penetrate in with the base CRM product, right, because we get the customer success there and the word of Veeva there, and its really -- that's part of our strategy to get in with the product, customer success and then further products. But now, about the salesforce.com platform, so we have a great relationship with salesforce.com, we are a preferred partner for the global lifesciences industry, things are going well, and actually, I think for us this year, you could really see the momentum at salesforce, of their platform business, and people, Veeva and others building specific applications on the platform, and this is a key part of their strategy. So the nice thing is that it's a win-win relationship for us and salesforce, that comes in line with their strategy. Now, as far as, we don't plan to replatform, it's not in our customer best interest -- our best interest or salesforce.com's best interest, but to answer your question, could Veeva replatform if we needed to, absolutely we could, as we have been doing platforming for along time, and we have platforms for other products, we could. But we absolutely don't think that's in anybody's best interest.

Great. Then lastly, Tim, just one for you on professional services. Obviously, you have mentioned the emphasis there. But do you guys feel like -- you said you built out the ecosystem. Do you have an adequate ecosystem to meet the demand for all the new bookings that you are seeing? We have seen several companies this year, that sort of run into some issues not having adequate support for the new deals?

Yeah. Hey Brendan, how are you? I think it's a good question. For the CRM products, I do believe that we have a very strong ecosystem, not only of the three partners that I specifically named in my remarks, but also a number of more regional players, where we have hundreds of trained folks in Veeva from a CRM perspective. I think that will grow over time, on the Vault and Network side. But I do not see that being an issue to our potential growth or our ability to grow.

Great. Thanks guys.

And our next question is from Richard Davis of Canaccord.

Hey thanks. Maybe taking up a little bit of an ancillary question off of Brendan's comments. So you talked about strategic relationships with leading pharma firms, and in my experience, when companies talk about those kind of evolutions, its also a time when the firms salespeople kind of begin to sell higher in the organization. Can you talk about how you are managing this evolution in your sales, effort, and staff, and how you see that playing out? Thanks.

All right Richard. Yeah, the strategic relationship, that's a great question. I think when you deliver more value into a customer, more product lines, more products, more divisions, more geography, that's really how you become strategic. As you deliver more value and as they see, the customer sees the potential of you to deliver even more value. Now with that comes many different points of contact, across divisions, products. Many different -- more contact points into Veeva, and that becomes a need to coordinate it. Now something we have always done, because we have had a field force in the different regions, and we have our field force, our sales force also split by commercial products and R&D products. So we have always needed to coordinate, and I would say that the changes going forward will be more formalization of a global account manager type role. Now, nothing abrupt or radical, I think that's a gradual change you get into, and in fact, it started with -- as soon as we started going internationally, but I think you will just see a gradual change of more of a specialization, in terms of global account managers, regional managers, product line, specific customer support people, that type of thing, in order to manage effectively the global relationship. And I think in this area, our customers have been great, because they give us feedback. They tell us how they want us to involve, they often explain to us, what of their vendors do this well, what don't do well. They give us clue. So if we listen enough, we can really excel in this area. And that's we try to do. The customer success being the number one value is really a real thing. So when we get these clues, we tend to try to act on them, and in some cases, may try out; try out experiments, and to see what works and refine from there. So I would view it as a process that we will be going through over the next 10 years really.

And Richard, this is Tim. Just to quickly add to that. As Peter talked about, as our customers use most of our products, we are gaining more traction. But the other thing we have, which is a strength of Veeva's is, we have a strong depth of experience in our sales organization, selling into this industry. On average, our sales folks are 10 to 15 years experienced into selling in this industry.

Got it. That's helpful. Appreciate that. Thank you very much.

And our next question will come from Tom Roderick of Stifel.

Hey guys, good afternoon. So wanted to take a step back out here, maybe ask a high level question. One we get a lot, I am sure you get a lot, is the question about market penetration. Can you give us a sense, if we can think about the global opportunity from a sales rep perspective, on the sales and marketing side, how many reps do you think about as being addressable, and how should we think about where the company is today penetrated from a US standpoint, global standpoint, ultimately trying to get a feel for where could market share go for your solutions, longer term? Thanks.

Matt, do you want to take that one?

Sure. Hey Tom. So I talked a bit in terms of the top 50 pharma, and we are roughly a third penetrated there. If you look globally, there is about 450,000 pharmaceutical sales reps, animal health sales reps and consumer health sales reps. I think I said before, the number has been pretty static actually over the past five years. It shifted around a bit. You will see announcements of layoffs in one country or one company. But there is also lots of announcements that you probably don't see, because they are not as public. Companies getting a new drug on the market, and increasing. So that 450,000 has actually stayed about constant, over the past four or five years. And so, we have penetrated roughly about a third of them, with just the base product. So then you ask kind of where is the opportunity. So obvious opportunity is to continue. There is another two-thirds of those sales reps roughly, that we can penetrate with the base product. But CRM is one of about 20 different applications that pharmaceutical and animal health and consumer health sales reps use on a daily basis or a weekly basis. So we have already picked off kind of two of those, what we call CRM add-ons. But these are not insignificant development efforts. These are six to nine even 12 month development efforts to replace a significant application that's controlling or managing an important business process, whether it'd be something around, call activity or especially around compliance or reporting, or any of these things. So over time, we do have plans to add more CRM add-ons; and the larger the install base, the larger of an opportunity we have for these add-on products. I will also say -- I mentioned earlier, Approved Email, this was something that really didn't exist before. Sometimes, we will replace things that they have an existing client server system for this deployed to all the users, and its kind of traditional replacing a legacy client server system. But as the market share gets high, and as the industry cloud model release starts to kick in, with integrated products and data being created. There are going to be opportunities to do things, that our customers aren't even thinking about yet. So that's something that keeps us excited, and we are always going to be looking out, for what's coming next.

That's great. Thanks. One quick follow-up for me. Tim, I [could turn] this on you. I have few questions about professional services. Can you give us a sense as to how big your professional services division is today, and what sort of hiring plans you have laid out for the immediate future, and maybe think about next 12 months?

At a high level for professional services, and I will let Tim answer this specifically on the hiring side of things. But the high level professional services, we will keep a pulse on that, which we can do, and we will hire to what we need to, in professional services, depending on the demand of the customers. That's the high level answer there. Tim, do you have any more color on specifics and headcount?

Yeah. So, we have seen some growth this year, Tom, and most of that growth has been toward some of the newer product categories like Vault and Network, because we are building out capacity to be able to manage that growth going forward. And as I said earlier, we will also work with our key strategic partners and regional partners to build that ecosystem.

And manage the demand. We have pretty good visibility into demand. Oftentimes, we have quite a strategic relationship with the customer. So many times, we may know 12 months in advance some time about a project starting. Its part of a plan, a multiyear plan we put together. So I think this will be more controlled in this area, rather than somebody who doesn't have as much lead time with their customers.

Great. Thank you guys. Appreciate the help.

Next, we have a question from Jason Maynard of Wells Fargo.

Hey guys. I actually have two questions. First, maybe on the Vault product line. What are you guys seeing competitively at least in terms of customers willingness to start to make the move? And I am curious if you think that this phase, if you will, of customer adoption, could potentially go faster, given the success that they have had with,, obviously, with your CRM products?

Jason, in terms of competitive areas, there are a lot of similarities with CRM in that. We are replacing these legacy client server systems in the CRM area. We had competition from Oracle, from (inaudible). In the Vault area, its often SharePoint and Documentum and the different application layers built on those platforms. Now, these vault applications -- Vault is a big product line, we think at least as big as CRM. And when the Vault area, if we just take one of the applications, lets say the ETMF application, that's sold into the clinical area, clinical operations more specifically, of lifesciences company. They wouldn't really consider too much the success of the CRM application, but that's in a completely different area. Now however, they would consider the validity of the Veeva company and the strong financial strength, so they would consider that. I think, Vault will track very similarly in CRM. We have to win the business of the different applications. We have to get the small pilot successful and happy. We have to watch them grow, and then at some point, it reaches a tipping point. Vault is a journey we have to work hard on this week, this month, this quarter, this year, and over the long term, many years. There will be no easy way to have growth in Vault.

Okay. And the other question I had was around Network; and the idea of master data management has been around for a long time, and that has been an extremely difficult problem to solve, and as you move to, what I will call I guess a data cloud model, can you may be talk about what you think the ROI -- hard dollar ROI savings are for this product line? I mean, where you think that comes from, whether you want to measure it in terms of reducing redundant labor, that information, you name it in terms of the validity of costs that are associated with this issue?

(Inaudible) that, the costs. The costs are varied in multiple areas of the lifesciences company. However, you can add them up. Your lifesciences company would know exactly the amount of money they spend on data, in general. They will know that. And then it's large. The amount of money they spend on data in general, as oftentimes, more than CRM. So it's large. Then they have software and service and things in data stewardship. So we don't have the exact number there, but it’s a large amount of data. But the reason why they would do this, is not about cost savings, its about driving more sales, because when you think about it, the pharmaceutical company, biotech companies who can spend billions of dollars each, per year promoting their products, they are doing it with a very substandard view of their customers. So they could be wasting significant percentages of their sources, and they are supplying significant percentages of the resources. So that would be the real driver. In some cases, there will be a specific compliance requirement, that will drive something immediately in the short term, if they have a regulatory compliance requirement in a particular country, and they don't have a clean list of customers, that will drive something immediate. But the bigger picture, is about the top, it's about using the field force more effectively in a multi-channel approach, which requires a clean view of your customer.

Okay. This concludes our question-and-answer session. I would like to turn the conference back over to Peter Gassner for any closing remarks.

Thank you. And thanks to our employees for all your hard work and in allowing us to have a great quarter here and to our customers for your partnership. That's certainly, a huge part of our great results, and what makes it enjoyable for us, and to our investors that are on the call today, and all investors for your partnership and your support of Veeva. Thanks everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.