Good afternoon. My name is Eric, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Veeva Systems Fiscal 2016 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Rick Lund, Veeva’s Investor Relations Director. You may begin your conference.

Thanks, Eric. Good afternoon. And welcome to Veeva’s fiscal 2016 first quarter earnings call for the quarter ending April 30, 2015. 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 trends, our 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 most recent filing on Form 10-Q, which is available on the company’s website at veeva.com, under the Investors section and on the SEC’s website at sec.gov. Forward-looking statements made during the call are being made as of today, May 28, 2015. 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 updates on our performance during the quarter, unless we do so in a public form. 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.

Thank you, Rick. I’m pleased to report that we are able to deliver another quarter of strong growth and profitability with results above our guidance. Revenue in the quarter grew 35% and nearly $90 million and our non-GAAP operating margins increased to more than 29%. It’s been a great start to the year with major new customers, expanded relationships with existing customers and a growing set of cloud products for the industry which positions us well for continued strong growth. Customer success and the innovation we are delivering across our product portfolio is driving rising demand for Veeva in the market we currently serve and in new areas. The reflection of our growing importance in the industry is the IDC life sciences spending survey release this month. Industry leaders were asked which vendors they plan to spend money within 2015. Veeva increased this position again this year and is now one of the top three software vendors for planned investments along with Oracle and SAP. This positive momentum is evident when I meet with our customers. Some of these plan to expand their use of Veeva in a broad range of areas and they want us to do even more. With the consistent track record of success with our product they would like Veeva to help them solve more of their industry specific challenges. We’re making great progress on building our industry cloud for life sciences. We’re executing well in our path to market leadership in every major market we’ve entered. Customers want to move away from legacy systems to the cloud and we have the industry specific solutions to get them there. It is significant that Veeva is the only cloud provider with leading solutions across the R&D, medical and commercial areas. Veeva is becoming very strategic to life…

Thanks Peter. Q1 results were solid on both the top and bottom line. Total revenue was $89.9 million up from $66.7 million one year ago, a 35% increase. We saw outperformance from both subscription and services revenue tough the upside relative to total revenue guidance was more concentrated in the services line. Subscription revenue was up 42% to $68.9 million from $48.5 million last year. Subscription revenue growth was driven by strength across all of our product lines while we continue to see an increasing portion of our subscription revenue coming from non-CRM products. Our services business performed well in the quarter driving the revenue of $21 million up 16% from $18.2 million year-over-year. These results were driven largely by growth in Vault projects. Overall our subscription revenue continues to grow faster than our services revenue increasing the recurring nature of our total revenue. For the quarter the percentage of mix was 77:23 subscriptions versus services, a 4-point shift year-over-year to subscription. The geographic mix of revenue remain relatively stable at 56% from North America and 44% from outside North America based upon the estimated location of users. In discussing the remainder of the income statement please note that unless otherwise stated all references to our expenses and operating results on a non-GAAP basis and are reconcile to our GAAP results in the tables from our press release which is posted on our website as filed with the SEC. In Q1 our subscription gross margin was 78%, an increase of almost a 150 basis points from a year-ago driven by the continued growth of Vault, Network and CRM add-ons, which have a slightly gross margin profile relative to our core SFA product. This metric declined slightly on a sequential basis from Q4 which is a normal seasonal pattern as the…

[Operator Instructions] Your first question comes from the line of Tom Roderick with Stifel. Your line is open.

Gentlemen, good afternoon. So let me hit the first question, just talk about Vault. Peter, I heard you say that it was a record quarter for new business involved, it seem like you are getting a lot of traction there and other top 20 win. So congratulations on all that. I’d love to hear a little bit more about what the dynamics are when you’re going through some of these global displacements relative to the opportunities eternally already at these big customers. We’re seeing displacements of big installed systems obviously document them in share points that will fit the bill there. Is there Greenfield opportunity for growth, how much of this is replacement, displacement growth and how much of it is sort of new Greenfield opportunity, to say look at ways to utilize the cloud for document content management?

Thanks Tom. The dynamics I would say at this time, of course the dynamics involved throughout its life cycle is going to move forward, of course they’re going to change as we do different things. But at this time it’s largely on the R&D side, to largely replacement of documentum as the core content management systems and then the applications built on top of documentum which may be built internally or provided from a third party or a system integrator. So that’s largely what it is. We are seeing some incremental Greenfield in terms of some platform activity on the edges, so that’s where people had a process that they didn’t adequate the automate and they are using Vault for that, but the bulk of it is they have legacy client service systems largely documentum base especially in the larger customers, and they are replacing that with Vault because they want to move to the cloud.

And then I think you have given some numbers in the call updating your thoughts on growth for Vault, sorry that I missed these, but relative to record new business quarter for Vault where do your [shake][ph] on thinking about the ability of that business to grow over 100% of subscription and with what you saw in first quarter in services how should we think about the contribution of Vault overall this quarter?

So I think the highest level message on Vault is that we’re seeing it track similar to CRM and we have some consistent improve points on that. Very specific proof points, one, tracking similar to CRM at the same stage of the life cycle in terms of revenue and the other one is -- and I won’t get into the specifics of the customer large customer type of situation where we can see the clear path to Vault revenue being similar to CRM revenue. So I would say that’s the most specific things. In terms of the numbers we've given we've talked about the non-CRM subscription revenue growing 100% for this year. And I think we have a -- above 100% for this year and I think we have a long room to grow from there with Vault. We’re just in the early innings of Vault.

Tim just quick question for you. I was writing furiously in your comments on the cadence of the billings calculation for this year and I think I got 5% growth for the next quarter 15% for the full year and 30% for next year. Can you just go through the explanation again relative to the timing of an eight figure renewal. I think I caught that that was something that happened last year that will get pushed out of this fiscal year and into the next year. So when talk about 30% growth looking out a year, does that include or exclude that renewal itself?

So Tom let me make sure we have the same set of numbers. In my prepared remarks what I talked about was, the calculated billings results if we do not normalize for anything we’re saying it’s going to be little more than 5% in Q2 and a little more than 15% for the year. If we normalize for the two factors that I talked about in those remarks Tom, number one you talked above which is the shift of an eight figure renewal out of fiscal 2016 entirely, and number two was the unusually high amount of billings per dollar of new annual contract value in fiscal 2015 and normalizing fiscal 2015 for that. Then our normalized billings growth for fiscal 2016 not for next year, for fiscal 2016 the year we’re in would be roughly 30%.

Your next question comes from the line of Jason Maynard with Wells Fargo. Your line is open.

I have two questions. So one I appreciate the color on normalization around billings but as you guys understand with the subscription model we’re all forced to use short term billings effectively as a proxy for annual contract value booking and in essence the health of your business, maybe I can ask a more blunt question which is, what do you guys think this business can grow in the next couple of years from roughly an ACV bookings perspective, and that way we can strip away [indiscernible], we can strip away billings and all those stuff that causes all of us financial wizards confusion as we listen to these earnings calls. And I have a follow-up.

Jason this is Tim. At this time we’re not giving any future -- anything beyond fiscal 2016 revenue guidance. We do see as -- Peter talked about in his prepared remarks, we do see the path to long-term sustainable growth. We didn't quantify nor are we planning to quantify it in this call. I will reiterate our guidance for fiscal 2016 which we’re very happy with which is the 30% or north of 30% subscription revenue growth for the year that you heard on our fourth quarter call and reiterated against today.

The follow-up then is really around headcount growth and looking at your non-GAAP operating margin which is getting dangerous close to 30%. With all of the new initiatives that you are looking at or the potential around Vault and looking at network and maybe even things that you could do another industry with these non-CRM products. Is there any hold back or difficulty in hiring? Are you guys staffing at a satisfactory level in your view relative to this opportunity for some of these adjacencies. And just how do you think about balancing near-term hiring against maybe your own potential to hire faster for some of these opportunities? I mean you have the people operations in place that you guys scale effectively to meet -- which sounds like great demand for some of these new products. Thanks.

Jason, this is Peter. Yes, I think we’re scaling effectively. We’re pleased with that hiring in our revenue growth. In our industry cloud model we have to pick the right products and go after the right products and every product has its maturity cycle and we have followed along with that. We will look to make investments this year in all areas in the field, in the new products area. But what we’re really doing a setting up for long term growth -- well position for long-term growth. So we’re planned to [seize][ph] these product and sometime it’s about doing the right thing, for instance this KOL data acquisition that we did that was very strategic for us starts up small in size, but then we can really build it to the place where we want it and that’s what we’re doing in all areas of the business. Probably started off more than four years ago and now look where it is today. So sometimes it’s a matter of just doing the right things and also I would have to say we do plan to run a profitable business that’s just part of the industry cloud model as well.

Your next question comes from the line of Bhavan Suri with William Blair. Your line is open.

Hi, guys. Thanks for taking my question. Two quick ones, one, you guided billings a little conservatively on the fourth quarter call about the first quarter and obviously handily beat those. As you look at that 30%, I’m just trying to understand sort of what the level of conservatism is built into that normalize 30% rate given what you’ve seen historically. So I’m just trying to understand how conservative that is.

Bhavan, this is Tim. Thanks for the question. When we think about guidance we guide and in this case when we think about the analysis of the normalization of the calculated billings metric we do it with the best information we have today I wouldn’t want to throw an adjective at it to whether it’s conservative or not. So I think we are very thoughtful in our guidance and it’s with the best information we have at our disposal at this time.

Fair enough. And then just a more fundamental question, we’ve talked about the CRO market a little bit you’ve had a couple of wins last year. Just any update there and sort of in the large CROs you’re starting to see some expansions there of some of the Vault products?

Hi, Bhavan this is Matt. So the CRO market continues to be an important market for us. We’ve made so much progress in Vault on the clinical side with eTMF that it’s looking like it’s becoming a standard. And one of the things that that create is when CROs are competing for a big deal at a pharma company. The pharma companies are now asking what is your level of experience with Vault and that is helping to drive some of the discussions we’re having with the CROs. So I would say there is two things going on, the CROs that are using Vault today are having a lot of success and they are expanding their usage and the usage within the sponsors within the pharma companies is driving incremental interest within the other CROs that are not yet using it.

And do you think this network effect that you might see between CROs and the pharmas plays out amongst like the med devices in the pharmas and other constituents? Is sort of this whole concept that we might standardize across multiple sort of these adjacent verticals on some of the Vault product?

So to a certain extent yes, but in medical and in animal -- actually animal health not so much with medical products, consumer products there are different CROs actually. So the company with the largest for medical products in the U.S., the largest for medical products in China generally is different. So I don’t think that you can necessarily assume the success in pharma translates into these other segments of healthcare I think we don’t have their own dynamics.

Your next question comes from the line of Stan Zlotsky with Morgan Stanley. Your line is open.

Hi, guys. Thanks for taking my question. Actually a few very quick ones, over the billing changes that you guys discussed, did any of them impact any of the revenue recognition through fiscal ‘16 by any chance?

No, neither one of the two factors Stan, that we’ve talked about -- and this is Tim of course, had an impact to our revenue recognition or I would say to the commitment from our customers in any of those cases. So the short of answer is no.

Okay, great. And just maybe put the final point on what other people try to ask is, after Q1 how are you tracking to your goal of 100% growth within Vault, are you on track, are you ahead or -- where are you?

Yes, so to be clear and Stan this is Tim again. The guidance that we gave for the year for subscription revenue was around 20% for CRM and then north of 100% for non-CRM and both are tracking well.

Okay. And on operating margins obviously very impressive, 29% operating margins in Q1 and as you look for the last year -- the year you’re expecting operating margins to decline slightly, where are the incremental investments going and why do you think operating margins would decline going forward or at least for the rest of the year?

This is Peter. Incremental investments will really be across the tall areas, so in the field actually across all geographies, and in all of our product lines. So in CRM and CRM add-ons and Vault, in OpenData and in network, so really across all areas and of course in G&A as we expand there and in services as we increase our services capacity. So it's really across all areas. And as far as the operating margin, Tim do you want to take down?

Yes Stan, I think this is true for Q1 and we saw this in the quarters last year, the operating margin performance in any given quarter has typically been driven by the revenue outperformance, so the outperformance in operating margin. So that’s one of the key drivers, but as Peter has talked about earlier we are looking to continue to invest in the business, both for our customer success and for our future scale in growth, so those are the types of things that are inclusive in the guidance that we put into the call today.

And last one for me. Just one for Peter or Matt. With the hiring of Alan Mateo, what are his top priorities -- top strategic priorities for the rest of this year?

Stan this is Peter. So we’ve brought in Alan to be our EVP of global sales. So his top priority in the beginning of course as any new EVP of sales comes in, you got to learn a bit about your people, your team and where they are and your customers, you got to ground yourself in the company. But beyond that it's about putting in process in place because we’re scaling more products, more customers, more revenue, so we need our processes to mature and it's also about developing deeper relationships with our customers. And start getting more efficient in our sales team and more effective in our sales team as we scale, as our relationships with our customers scale because that’s really -- I’ve put in my remarks one thing that I hope everybody tuned into we’re becoming increasingly strategic to our customers, because we have leading products, leading and very important products on the commercial side, but also leading and very important products with Vault on the R&D side. Now we’re the only vendor to have these things. And that creates a whole thing a dynamic because Commercial is one side of pharma and R&D is on the other side of pharma and that really meet up the CEO level. So when you are a strategic vendor on both sides, you have to treat those relationships in the certain way and that’s what Alan is going to be evolving for us.

Your next question comes from line of Sterling Auty with JP Morgan. Your line is open.

So we talked a lot about timing of renewals, co-terminus and the move to the fourth quarter et cetera. I guess I am curious about how you would characterize the new contract bookings in the quarter, granted we understand you have the big GSK win but how would you characterize the rest of that new contract bookings for the quarter relative to your expectations?

Sterling this is Tim, thanks for the question. So I think this quarter was -- we were happy with the quarter in terms of our new business relative to the expectations. You heard us talk last year in a few cases, in a few quarters where we saw some accelerated business for in some cases some material customers and this was as I would characterize as a more normal quarter Sterling. One thing that we want to make sure that we understand is as you mentioned the GSK win that is a win from a contract perspective and as we discussed in the press release I believe that over the course of time they will fill the users out throughout the globe. So that’s not necessarily a material bookings piece in Q1, it will happen overtime.

Okay perfect, that was going to be the follow on, so how do we think about how that then flows into revenue? Is that a slow trickle in over two years or does it become lumpy and kind of hard to tell at this point?

Hey Sterling this is Matt. So what we’re seen with the large global companies is that they run these big global CRM programs. They have averaged every three years to four years they can complete them. This is one will be across more than 50 countries, and so we look at the licenses and the subscription revenue coming in over a two to three or even four year cycle in order to get to the full global rollout.

And then Tim, on the moving around just in terms of renewals, et cetera. How does that impact you collections, cash flow and DSOs?

How does it impact our collection, cash flows and DSOs, it dent. But moving around that we’re talking about, so when you say they’re moving around I’m assuming what you mean is the movement of that eight figure of the renewable, what we’re saying there is we moved the billing of that out of fiscal ‘16 into early fiscal ’17. So the bill will obviously trigger what the collections effort is and the ultimate DSOs, so I don’t think the movement of the bill itself will impact either of those metrics obviously that will mean since we’re billing them later we’ll get the cash later. But that again is an okay trade-off for us given the fact that this is driven by the customer desire to lineup their budget cycle with their renewal.

Your next question comes from the line of Brendan Barnicle with Pacific Crest Securities. Your line is open.

Thank so much. Following up on Sterling’s question another way that look at this is, if I just do the quick back to the envelope what you guys are suggesting about billings and what that might mean to differed, my cash flow number comes -- operating cash flow number comes out in a flat to slightly down this year over last year. Is that the right way to think about this?

No, we don’t. We haven’t guided on operating cash flow Brendan for fiscal ‘16 versus fiscal ’15. I think if you’d take the pieces that we gave you in the prepared remarks meaning an unusual amount of billings relatively to new annual contract value in fiscal ’15 versus fiscal ’16, I think that would be -- and [indiscernible] the put is positive and take this negative, but let’s assume that’s the case that would impact our FY16 billings and therefore potentially operating cash flow slightly, but again not something that we’re specifically guiding on Brendan.

Sure and then if I think about the SFA business -- the core CRM business within that what part is no longer SFA, can you give us a breakdown between sort of the SFA and then the new email and add-on products there?

Hi Brendan, this is Matt. So I think the right way to think about the CRM business so -- and just to ground everyone here, the addressable market for CRM is 2 billion. It’s based on the number of sales reps globally, how much our customer spend to equip them with technology and adjusted for different spend levels across geographies. So as we approach the $300 million revenue run rate for the CRM business we’re approaching that 15% penetration of that $2 million TAM. And the way I think about our penetration in that market is a combination of three things. So there is the base SFA that you are asking about where we have roughly 50% market share penetration. In the current add-on products and I would include a line and events in the current item products we have less than 10% market penetration. And then for the future add-on products we obviously have 0% penetration. So we have room to grow in all three of these areas. We’re going to add more users. We’re going to sale more of the current add-ons into the growing installed base and overtime we will introduce more add-on into the future.

And so what I was getting at Matt, was within that CRM business, is there a breakdown you can share of what’s SFA versus what’s add-ons right now?

In terms of our revenue, you mean?

Yes.

So we haven’t broken that out but we have talked about the kind of relative penetration rates of the different add-ons and so I’ll give you color that I can on that. So the CLM, the first add-on that we had is basically becoming [probasive][ph]. So we have 80% or so attach rate on the first add-on. The second add-on, approved email were at about 10% of the installed base and engage still early and obviously with events in the line, we’re still on the starting line.

Great. Tim just one another point of clarification, did you say that the $1 million from the acquisition is not in the full year guidance right now?

No, it is and we talked about for the remainder of the year. Brendan, little north of $1 million we expect from the acquisition and that’s in professional services if you’re putting that into your model.

Your next question comes from the line of Karl Keirstead with Deutsche Bank. Your line is open.

Hi guys. This is [indiscernible] in for Karl. Thanks for taking my question. Tim, my first question is for you I had a question of billings. You mentioned that in fiscal ’15 billings was boosted despite the nature of the coterminous agreements. If you were to adjust fiscal ’15 billings versus that reported 50% growth in total billings, what was that addition number have been. And when we go from this year’s billings calculation from the 15% growth in ‘16 to the adjusted 30% can you give us the bridge on the two factors that you mentioned in terms of contribution from those two factors? Thanks.

Yes, sure [indiscernible] So in terms of the fiscal ’15 if you were to normalize the impact of those coterminous add-ons, it’s probably about 10% to 12% of the growth rate that we offer the actual growth rate calculated, so about 10% to 12% meaning 10 to 12 percentage points, just to be clear. In terms of the two factors that drove the normalized billings calculation, it was probably close to 60%, as it was driven by normalizing the fiscal ’15 billings for the coterminous add-ons and about 40% for the shift in the eight figure renewal.

And my next question it's regarding the new sales head Alan Mateo. Are there any changes to the sales -- existing sales structure that could be offering. Anything else you might want to tweak or optimize in the way Veeva is going about sales right now?

This is Peter. I think there will be no changes in the sales structure, in the short-term we have a structure that’s working for us. I think these are things that we evaluate we learn more over the year and then have the start of our new sales year, which starts fiscal year February 01st, we’ll always counter evaluating and see what adjustments we make. But there are not interim adjustments that we’re planning.

And my last question is on the products. I think Matt you mentioned that you hit a 15% penetration on the CRM product side on the 2 billion TAM. If I do the math there that’s roughly 300 million, and on equivalent basis that’s roughly 75 million and if you do the 75 million on the quarterly revenue that you posted today, I think the non-CRM business was slightly less that 20% of total revenues, was this the over 20% that you posted last quarter? Is that just a function of maybe services revenue being moving around a bit or anything there on the momentum of Vault versus CRM?

So the short answer in terms of the non-CRM revenue for Q1 it's actually slightly above 20%. We said roughly 30%, excuse me roughly 15% of the $2 billion market share, so it's not exactly $300 million.

And one last follow-up. I was looking at the professional services revenues, and it seems to have slowed down from the levels that we saw last quarter and last day at 16%, and you mentioned that the revenue growth comes from the Vault engagements. Is there anything else that you are doing strategically by moving services revenues at a faster pace to partners or anything else that caused the slight slowdown in the services revenue growth rates?

In general what we see is partners taking a little bit more things in the CRM area as the products mature and that’s working right and in Vault since its newer and we have multiple applications as well maybe -- we were getting a higher percentage for that in terms of quarter-to-quarter also Tim maybe you can comment there is also small amount of days in the Q1.

I think that’s the case [indiscernible] and that has a bigger impact on subscription revenue but it does impact services revenue for billable day. And the other thing that I would say in general is services revenue is going to be a bit lumpy it's hard to draw a lot of conclusion in quarter-to-quarter sequential growth or even year-over-year growth. It will really depend upon the stack up of the potential projects most of which are T&Ms, some -- we've some 16 milestones that pop in a particular quarter. So it's a little bit more of a lumpy business [indiscernible] than clearly our subscription business.

We have time for one more question. The question comes from the line of Kirk Materne with Evercore ISI. Your line is open.

This is actually Patrick [indiscernible] dialing in for Kurt. Congrats on the quarter guys. Can you just give us some idea of your success selling Vault outside the core-CRM quarter?

Outside the quarter core-CRM base meaning selling Vault into companies that don't have our core-CRM. So we’re doing well in that area and that really comes in two flavors, sometimes actually the most common flavor that comes in is it might be a small customer that doesn't have a commercial field force yet very small biotech developing their profits for the first time, so Vault is very likely going to be their first product because they don't need our Veeva CRM yet. In terms of the large and mid-size companies and many companies overall, we gave the breakdown of about 50% market share as for the base SFA when we measured users, but if you measure that by companies -- because of course we’re not all deployed in all divisions and geographies at all companies, there is a high percentage of companies that have Veeva CRM somewhere. So in the companies where they have a commercial -- they have a commercial organization ready a lot of those folks have Veeva CRM and so we’re selling Vault in on top, but it's very common these days for as a company is emerging Vault is definitely the first product they get from Veeva, and then CRM is probably the second product they get.

That is all the time we have for questions. At this time I will turn the call back over to Peter Gassner.

Thanks everyone for your participation today. I would like to take a moment to thank our employees, partners and customers for their contribution to our success in Q1. And together we have an exciting opportunity ahead of us. Thank you everyone.

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.