Veeva Systems Inc. (VEEV) Q2 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Veeva Systems Fiscal 2021 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Rick Lund, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon, and welcome to Veeva’s fiscal 2021 second quarter earnings call for the quarter ended July 31, 2020. With me on today’s call are Peter Gassner, our Chief Executive Officer; Paul Shawah, SVP of Commercial Cloud; 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, including those related to the impacts of COVID-19 on our business, the life sciences industry and global economic conditions. 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, 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, August 27, 2020 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 will provide guidance on today’s call, but we’ll not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. The guidance we will provide today is in part based on our current assumptions as to the macroeconomic environment in which we will be operating in the future, including the timing and pace of recovery from any negative effects caused by COVID-19. Such matters that are beyond our control and our assumptions may not be correct and may change rapidly. 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 and in the supplemental investor presentation, both of which are available on our website. A reconciliation can also be found 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, and welcome, everyone, joining us today. Q2 is a strong quarter. Total revenue was $354 million, up 33% year-over-year. Subscription revenue grew 31% year-over-year and non-GAAP operating margin was 41%. We’re also raising our full-year total revenue guidance to $1,420 million on the top end, which is above the initial guidance we provided in March. This reflects improved visibility into the back-half of the year and now that we’ve had more time to understand how the life sciences industry is adapting to COVID-19. Our life sciences customers reported that the second quarter was as expected with fewer patient visits, delayed procedures and the reversal of Q1 stockpiling. They see some areas improving and are more optimistic as they look to the second-half. More clinical trials are starting back up as clinical research sites reopen. Of the studies that were disrupted, roughly half have now restarted. Crossix data shows an in-office patient visits are trending up from a low of 52% of pre-COVID levels to 84% at the end of July. At the same time, telehealth visits are at 10% of total visits. While this is down from a peak of 30% a few months ago, it is significantly higher than the 1% before the pandemic. Overall, the industry is rethinking their approach to digital and this aligns well with our current offerings and future strategy. One of the newer areas that’s created a lot of excitement is MyVeeva. MyVeeva is the overall brand for our two consumer-facing applications. One targeted to patients in clinical trials and one for doctors. This is an important new territory for Veeva and for the industry as we provide better ways for our customers to serve patients and doctors online. I talked about MyVeeva for clinical trials on our last earnings call, and this quarter, I will give an update on MyVeeva for Doctors. We announced MyVeeva for Doctors at Veeva Commercial Summit in June. MyVeeva for Doctors is a website and mobile application to make it easier for doctors to connect with life sciences. It will provide a single place, where doctors can go to get information, services and contact directly from life sciences companies in the standard easy-to-use format. Today, there is no single place for doctors to go for this. MyVeeva for Doctors has the potential to be a game changer. This product will be available at the end of the year for the U.S. market, and we’re currently in discussions with a handful of potential early adopters. This type of innovation and product leadership in commercial has allowed us to expand our position as a strategic partner to the industry and gain market share. We recently won two significant CRM deals for the domestic teams with large Japanese pharma company. Veeva Approved Email and Veeva Engage Meeting usage is increasing and our virtual events business in the Physicians World is gaining momentum. Overall, customers are looking to Veeva as they define their digital engagement strategy. They appreciate the partnership we’ve provided since the earliest days of pandemic, with Veeva teams going the extra mile, our product innovation and our support with programs like free Engage Meetings, which we have extended now through the end of the year. In the data area, I also wanted to provide a quick update on Veeva Data Cloud. We’re now working with three early adopters for our U.S. longitudinal patient data. This is our first Data Cloud offering and general availability is targeted for December. Leadership in the data market will take many years. But we’re confident in our strategy and encouraged by early progress. The market needs innovation and now alternative to the legacy provider. Looking ahead in commercial, I have never been more excited. We are well-positioned for the future and continue to increase our leadership position as we bring real innovation and partnership to our customers. Before I move to Vault, a brief update on our antitrust trial against IQVIA. For years, IQVIA has used illegal tactics to maintain their data monopoly and leverage that monopoly could benefit their software business. This harms customers, patients and Veeva. Commercial Cloud products impacted include Veeva Network, Nitro and Andi. We filed our antitrust case in 2017 and we remain confident in our case. Due to COVID-19-related court delays, we now expect the case to go to trial near the end of 2022. On the Vault side, customers increasingly look to Veeva as they work to streamline drug development. We are seeing this across every area of Veeva Development Cloud. Vault QualityDocs and Vault QMS, both had record quarters. Two top 20 pharma selected QMS and one top 20 selected QualityDocs as their enterprise standards. It was also a great quarter for regulatory. The top 20 pharma made the decision to adopt a full RIM suite and another top 20 will deploy Vault registrations globally. Momentum is building in clinical as well. This is one of the areas of greatest need for our customers to modernize. For instance, in CTMS, which is the heart of clinical operations technology, we had an outstanding quarter. We now have more than 70 Vault CTMS customers in just three years since we released the product. In the second quarter, we had our first go live with a top 20, added another top 20 and signed our first top seven CRO. We also had CTMS pilot started two additional top 20 pharma. We’re also making good progress on the clinical data side. More than 100 studies have now started on Vault CDMS. Customers appreciate the innovation and agility that Veeva CDMS brings, as well as the benefit of the integration with Vault eTMF and Vault CTMS. In the quarter, we had a win with a second top 20 pharma, who will run a handful of complex oncology trials on CDMS. If successful, this could lead to a broader deployment. I’m really excited about clinical. Our leadership position in clinical operations continues to expand. We’re making great progress in clinical data, and there’s a lot of interest in MyVeeva for clinical trials. Clinical is a large area and it’s all coming together nicely. Finally, I’d like to share an update on our efforts outside of life sciences. The industries we serve continue to be impacted by the pandemic. But I’m encouraged by the success we’re having with existing customers who continue to expand their use of Veeva. For instance, the top CPG company will replace an established incumbent with our quality applications across all their business units. Additionally, we continue to make progress with new customers. The top 20 agrichemicals business has selected regulatory solutions as their enterprise standard. Overall, the team had a strong quarter and is executing well. Before closing, I want to give special thanks to Tim. This is his last earnings call with us, and I’m grateful for his many years of partnership. Tim is staying with Veeva on a part-time basis going forward as an advisor and mentor to the Veeva team. Finally, I’d like to acknowledge all of the Veeva employees for their innovation and creativity to come up with new and better ways to continue to support customers. And I’d like to thank our customers for their tireless efforts to fight this pandemic and to improve the lives of patients around the globe. I’m looking forward to deepening Veeva’s partnership with our customers for many years to come. With that, I’ll turn it over to Tim.

Thanks, Peter. As Peter mentioned, the life sciences industry remains relatively healthy overall, and our customers are confident in their outlook for the second-half of the year. After working through key business continuity projects in the spring, many of our customers have refocused on core operations and continue to make technology investments to support long-term growth. Against this industry backdrop, we saw strong demand across our product portfolio in Q2. Commercial Vault had a great quarter and QualityDocs had its strongest bookings performance ever. We saw increased uptake for products like QMS and CTMS, which are gaining broader adoption. In addition, services demand was particularly resilient in R&D across a range of implementations of Veeva Development Cloud applications. Taken together, these factors help drive meaningful revenue outperformance in Q2. Strong demand also drove our bookings outperformance, which, coupled with our strong services demand, resulted in a calculated billings total that was $25 million above our guidance for the quarter. This included subscription deals closed in Q2, which were expected later in the year. Calculated billings also benefited from better-than-expected billing duration for the new business closed in Q2 and fewer-than-expected customer requests for billings changes. Another dynamic that shaped the quarter was the favorable hiring environment for Veeva. We added a record 357 net new employees in Q2. Our hiring was boosted by the new class of Generation Veeva, our university hiring program that primarily feeds our product and services teams. We are committed to investing in the business and have an aggressive hiring plan for the back-half of the year. Additionally, in Q2, operating margin saw 250 basis points benefit from travel-related cost savings and lower customer event expenses. Given the ongoing uncertainty around the pandemic, we expect to see continued cost savings in these areas for the rest of the year, although not quite at this level of benefit. Turning to guidance. Our outlook is informed by the improving environment for our customers and continued growing demand for our products and services. Though as we discussed last quarter, we remain mindful of certain customer segments and industry dynamics that continue to face COVID-19-related headwinds. Please note that combined, these segments represent a small portion of our overall business. For the full-year, we now expect total revenue to be $1,415 million to $1,420 million. This increase brings our full-year guidance ahead of the outlook we provided during our fourth quarter call back in early March. Subscription revenue is expected to be about $1,155 million for the full-year. Commercial Cloud subscription revenue is anticipated to be roughly $585 million, with the Crossix contribution unchanged at $76 million to $78 million. Meanwhile, full-year Vault subscription revenue is expected to be roughly $570 million. While the headlines we saw in Q1 somewhat persisted with Crossix and Physicians World, both performed in line with our expectations for the second quarter. Advertising spend is rebounding and virtual events are starting to see momentum. But neither of these businesses are near pre-COVID-19 levels. So our full-year total revenue guidance of $90 million to $95 million remains unchanged. Our full-year non-GAAP operating income is projected to be between $540 million and $545 million, a non-GAAP operating margin of roughly 38%. Full-year EPS is expected to be $2.64 to $2.67 on a fully diluted share count of approximately $163 million. Looking ahead, we’ve revised our full-year calculated billings up to $1,500 million from $1,480 million, the high end of our previous guidance. We anticipate calculated billings of about $245 million for the third quarter. Please remember that there are numerous factors that make year-over-year comparisons of this metric highly variable on a quarterly basis. Therefore, we do not believe it is a good indicator of the underlying momentum of our business and we do not manage to it internally. Our subscription revenue guidance and calculated billings guidance for the full-year are the best indicators of our momentum. We are also raising our guidance for full-year cash flow from operations, excluding the excess tax benefit to $475 million, up from $450 million previously based upon the strong demand we are seeing in our expected full-year billings. For Q3, total revenue is expected to be $360 million to $362 million, with subscription revenue contributing about $295 million. Non-GAAP operating income is projected to be $138 million to $140 million and non-GAAP EPS is expected to be $0.66 to $0.68 based on a fully diluted share count of approximately $163 million. Before I close, I would like to take a moment to express my thanks. First, I want to thank Peter, Matt and the Board for giving me this amazing opportunity and entrusting me with the role of CFO. Thanks to our leadership team for being great partners over the past 11 years, and the entire Veeva team for the incredible execution, spirit of innovation and teamwork and always living our values. Lastly, I would like to thank my team for their focus on excellence in the work they do every day. Today, I’m as bullish as ever for the opportunity Veeva has in front of it, and the impact we’re making with our customers in such a mission-critical industry. I’m extremely confident I’m leaving Veeva in capable hands with Brent and my leadership team. Thanks for joining us today. And now, I’ll turn it over to the operator for questions.

[Operator Instructions] Our first question is from Brad Sills with Bank of America Merrill Lynch. Your line is open.

Oh, great. Thanks, guys, and, Tim, congratulations on your new role. You’ll be missed. You’ve been a big help over the years.

Thanks, Brad.

Yes, absolutely. So my question is really just on CDMS and clinical. Obviously, you had a large – it sounds like top 20 deal there. I know the focus has been on kind of building the referenceability and the feature set to go after that category. Do you feel like you’re kind of there at this point? Should we expect more of these kinds of deals coming for CDMS?

Yes. Brad, I’ll take that one. Yes, these are complex areas, clinical. I do feel that, we’re incrementally growing the business, yes. The product is getting more mature. We’re getting some more reference customers. It’s early. Still in CDMS, it’s early. It’s a big broad area, but I feel like we’re on the right track. The core of CDMS, the electronic data capture part is starting to become pretty mature in its product, but there’s a lot of new things in clinical, too, like MyVeeva for clinical trials. So we’re doing well. I’m really happy with it.

That’s great. Thanks. Thanks so much, Peter. And then outside life sciences, chemical win here, it sounds like agrochemical, is that the first of its kind in this industry? I know you’ve previously talked about CPG and cosmetics. Should we view that as a potential catalyst for that segment of the outside life sciences?

Outside life sciences, I would say, our two strongest verticals, CPG and cosmetics. We do have some chemicals, including some agrochemicals. We have a handful of agrochemical customers now. So – but I would – nothing has changed there. I would say, CPG and cosmetics is still our main focus.

Got it. Great. Thanks so much, Peter.

Thank you.

Our next question is from with Saket Kalia with Barclays. Your line is open.

Okay, great. Hey, guys, thanks for taking my questions here. And let me echo my congrats here for you, Tim.

Thank you, sir.

Maybe – sure. Maybe first for you, Peter. Can you just talk a little bit about what you think is driving the increased adoption of quality? Is this something where more reference customer success is maybe helping to broaden that adoption? Or is there something else you feel like is prompting customers to replace what they were using before in favor of something like Veeva Quality?

It’s a great question. I think there’s a number of factors. I couldn’t point to exactly one, but it’s a combination of – we’ve now filled out the suite. We have QualityDocs for the SOP management. We have the Quality Management System for the CAPAs deviations, those types of things and we also have training, all in one unified platform. Nobody had that before. So it was a little bit hard for customers to understand at first. Now people are early – seeing early adopters do it. That’s creating a lot of interest. I think, actually, COVID provides us a little bit of boost, because it’s okay, everybody in the life sciences, there’s more need to access things remotely and we perform. That’s one thing about Vault. It performs exceedingly fast promote. We measure the performance from the end users browser time, and that’s all around the world. The average time to view a document is less than 1.5 seconds. That’s unheard of, of their existing systems. So these things are providing momentum. But one thing to know, quality is maybe our most conservative customer segment, very conservative. So the fact that we’re moving fast in this conservative segment is really outstanding.

That’s great. Maybe for my follow-up for you, Tim. Can you just talk a little bit about what look like healthier professional services gross margin, I imagine some of that is maybe from things like higher utilization, maybe some more remote engagements. But I’m curious maybe how Physicians World is impacting that, if at all?

Yes. I think you’ve hit the head – the nail on the head in terms of the two primary drivers to what we saw in terms of professional services margin this quarter. Just to recap, strong demand leading to really strong utilization. And at the same time, we really don’t have any travel costs in a business that has a bit of travel most of the time, Saket. So you see the bottom line benefit of that in our services gross margin. Physicians World, while, as I said, they did in line with what we expected. It really doesn’t move the needle in terms of the size of that business relative to the overall size of our professional services. But they did well in Q2.

Got it. Very helpful. Thanks, guys.

Next question is from Tom Roderick with Stifel. Your line is open.

Great. Thank you for taking my questions. I appreciate it. And, Tim, we’ll miss you. It’s been fantastic working with you. So best of luck on the next adventures for you. I guess, the question, I’d love to dive in a little bit deeper and, Peter, you can kind of handle this. As you think about the big picture that’s going on with spending trends and then the big picture that’s going on with net new trials and activity across the space. Obviously, the strategic picture looking at one to three years is very favorable. In the near-term, I’m sure there’s some caution about when do we pull the trigger on net new purchases and IT. Can you just kind of talk about how the strategic conversations you’re having with buyers are thinking longer-term and manifesting themselves more near-term with respect to your portfolio and particularly interested on how that sort of plays out on the Vault side?

Yes. Tom, I think, high level, important to know life sciences as a long – their long view on these things could take 10 years to bring the drug to market, product has a 20-year life cycle. So they have a long-term view to start with, and that hasn’t changed. There – we don’t see project delays or anything like that. We do see customers sometimes shift priorities a little bit. They may have COVID-related emergencies, which might relate to Veeva or non-Veeva. And when they relate to Veeva, that caused a little burst of business for us. When it relates to non-Veeva, that might delay one of our existing projects. So – but all in all, it’s good. They’re looking for efficiency and digital. So I think it’s very – it’s a very good thing for us and it feels nice and steady. It feels to me like life sciences has totally found their way and is comfortable with COVID. They know they have to contribute majorly for society and it’s causing this burst of innovation and they can see their way through it.

Yes, fantastic. That’s great. And you’ve shown some enthusiasm now for a couple of quarters on MyVeeva, really excited to hear that, that’s coming out later in the year. Can you sort of share with us how that might play out from a modeling perspective, or even just a pricing perspective to how customers will pay for this and users can access it? So thinking about one side of this being access for clinical trial patients and then the other side for doctors. Take us through how this plays out in the model. And then the go-to-market on this as you start to roll this out at the end of the year?

Yes. We’re very excited about it, and you’re right. It’s new for Veeva, right? These are the applications for consumers, patients in clinical trials and doctors. In terms of the model, we won’t be charging the doctors or the patients directly for that, right? That’s – we’ll monetize that through providing benefit for life sciences. And then as far as the details of exactly how and when and size of that, it’s just a little bit too early to go into that, where we’re really forming the product with our early adopters. And that’s what we’ll focus on customer success first. There’s a tremendous amount of value there and we’ll be able to monetize that in a reasonable way as we go forward.

Great. Fantastic. We look forward to more in that. Thank you very much. I appreciate it.

Thanks, Tom.

Next question is from Stephanie Davis with SVB Leerink. Your line is open.

Hey, guys, congrats on the quarter and let me echo them. Congrats on a well-deserved move on. So I was hoping you could dive in a little bit deeper into the new wins for longitudinal patient data. Were they de novo or competitive takeaways? And what pushed these clients over the finish line, given it’s relatively new introduction?

Yes. The longitudinal patient data, I’ll take that one. This is Peter. These were not takeaways. These were – I guess, they’re competitive, that’s for sure. They – these were people that were looking to analyze patient data to answer some questions that they hadn’t been able to answer before. So they’re specific to a brand. So they would have looked at other data sets and decided to go with ours, partly because they have strong partnerships with Veeva and they’re looking for innovation. They’re unsatisfied with the data sets that they get today. Well, maybe that’s too strong, maybe not unsatisfied. They feel like there’s something better out there. So they’re going along on this journey with us. But the main thing to know about the early adopters, the main thing is not the sale. It’s the partnership and the working together to help improve and shape the early product. That’s what I’m really excited about. We’re getting feedback. It’s just invaluable from these early adopters.

Understood. And then pivoting a bit to the reiterate guidance for Crossix and Physicians World, just with the pandemic continuing longer than many of us expected. Have you found any alternative ways to monetize and grow the virtual events business just given events are still ongoing?

Yes. We’re pretty bullish on that. So we have some uptick in business in the virtual events. And I think that’s something we’re looking forward to partnering with our customers as they go forward, because they’re – yes, everybody is realizing that, a, pandemic is here a little longer than we initially expected and the power of digital is really being impressed on people. So we’re pretty excited about our plans there.

Okay, understood. Thank you for that update.

Thank you.

Our next question is from Joe Vruwink with Baird. Your line is open.

Great. Hello, everyone, and also extend my best wishes to Tim. Peter, I wanted to go back to your comments on never being more excited around the commercial suite. And I guess, are there things when you refer to just life science customers having more visibility within the last couple of months? Are there things about Veeva’s visibility into particular areas of commercial where maybe there’s some things, which actually are driving the comment that you’ve never been more excited? And you touched on a few things, virtual events and maybe the ability to integrate that into Engage and create this broader set of products that, that maybe is one area. But if you could just dive into maybe any specific things that are perhaps new in the last few months?

Well, my planning horizon or the things I get excited about are usually a little longer-term, right? So 2025 is my focus. And I would say, that’s what I’m excited about. I feel like, commercial, we’re going to add a ton of value to our customers as we go towards 2025, and it’s a combination of things. One is, I feel like we have potential to really do impactful things here in digital, not only with Engage, but with MyVeeva and with virtual events. So that is pure technology-based value that is added to the customers on the commercial side. And then the data, Data Cloud, that’s a very large market, very strategic. And I can see the innovation we’re bringing and the feedback from the early customers. So that’s also important. And then the partnership, how the partnership in basically the pandemic in this time of stress is causing Veeva and our customers to get closer together. And I would say just the last thing, the hiring, not only the experienced hiring, but the awesome new graduates that we’re bringing into the company and teaching them the right way and our policies and procedures around that. So, sometimes you work really hard and things come together and the timing is right, and maybe there’s some sprinkling of good luck. But I’m just optimistic about our future.

Okay, that’s helpful. I want to shift gears and have a question on profitability. With Veeva already being back above the 40% kind of high watermark. Are there things other than you touched on professional service margins already, other things beyond just the strong top line performance providing greater leverage? Because as you brought up, you’re still doing a good amount of hiring. And I’m curious, are there other upside drivers in the model?

Yes. Hey, Joe, this is Tim. The other area that we saw benefit in the quarter to the tune of about 250 basis points was the fact that we had very little travel-related expenses and we moved all of our customer events to virtual. So those both materially impacted – well, to the tune of 250 basis points impacted the operating margin performance for Q2. As we look out in the year and given the uncertainty of the pandemic, we do expect savings across those two expense lines, Joe, to continue, not at the level we saw likely in Q2, probably a little bit less than that.

That is helpful. Thank you, both.

Our next question is from Sterling Auty with JPMorgan Chase and Co. Your line is open.

Yes. Thanks. Hi, guys. Tim, congratulations on a great tenure. I’m just kind of curious if you could answer a question I’m getting frequently from investors, just to level set Veeva. As you think about COVID-19, investors are looking at Vault and wondering how many new Vaults might be starting up just to support COVID research? And how many of the clinical trials you might be benefiting from? So they’re looking for, is there a way to quantify the COVID-19 benefits that you might be seeing?

Hey, Sterling, it’s Peter. I’ll take that one. I don’t have exact numbers for you. A very small portion of our work is specific to COVID-19. Now, it’s important and it’s strategic. And so we’ve done clinical trial work, where the team has had to really hustle and work that we can and our technologies really help. But in terms of business or financial, it’s a very small portion. COVID-19 overall is very important. But if you look at life sciences overall, it’s a small portion of life sciences revenue.

Great. And then one quick follow-ups. The MyVeeva for Doctors. Can you give us what do you think is going to be the biggest use case? A high level, I understand, I think, its intention. But what do you expect the biggest use case to be for that solution?

Hey, Sterling, this is…

Yes, Paul, why don’t you take that one? Yes.

Yes. I want to take that one. All right. So this is Paul, Sterling. Thanks for the question. Yes, I mean, this is a really – it’s a really significant one. It’s a different approach to digital. What we’re doing here I view this as a platform that’s going to lead us and lead the industry and kind of that kind of next direction and next day innovation in digital space. If you think about the problem that it’s solving and most doctors, they deal with multiple different pharma companies. And from those pharma companies, they probably are dealing with multiple different brands. Every pharma company would love to be in the pocket of every HCP, accessible via an app or accessible via website. But when you multiply that out, it’s just – it’s a – the law of large numbers takes any, you end up with the fact that it’s too complex for the doctor. They can’t be able to engage digitally with so many different companies, because they’d have to download so many apps. They have to go to so many different websites, remember so many different passwords. We’re putting all of that into one place. We’re making it really easy for the doctor to access the entire industry, all in one place on an app, or on a website. And we’re building it around. We’re doing digital differently from the standpoint that there’s a human relationship involved. There’s a human being, the rep or the medical science liaison or some person from the life sciences company who is creating a connection with the HCP. And what that means is, once they create a connection, they’re able to do certain things. They’re able to chat, they’re able to share information, they’re able to request samples. So as we talk about this with our – with some prospective early customers, we’ve had a ton of interest as – after we’ve announced this. They’re real interested in use cases of secure communication. So how do they interact with customers in a secure way that is compliant. So things like a text message may not be so compliant. But doing it via MyVeeva would be, they’re looking to do things like schedule more Engage Meetings with them. They’re looking for ways to be accessible by that doctor to do things like requesting samples on their own terms. So really, the big problem that we’re solving is, we’re making it easy for the doctor to access life sciences when and how they want to and to enhance the relationship that they have with their reps. That’s really the way to think about it.

Excellent. Thank you so much.

Next question is from Ken Wong with Guggenheim Securities. Your line is open. Ken Wong with Guggenheim Securities. Your line is open.

Oh, sorry about that, mute. You guys have previously focused primarily just on pharma biotech customers? Should we view MyVeeva as sort of a one-off push into consumer? Or do you guys have grander aspirations to expand into that particular market?

Yes. So this is an interesting one. When doctors think about their practice and the products that they use to for their patients, they don’t necessarily think, hey, this is just pharma or just med device or they think about the full portfolio of products that, that could be applicable to their patients. Now, which could lead us down a path over time for us to enabling us as a solution for HEPs that are able to interact more broadly with life sciences companies, but consumer and med device. Having said that, that’s certainly a long-term play and something that we would – a long-term vision that we would grow into. The focus for us today is purely on the life sciences companies. Remember, what we’re doing here is, life sciences is our customer. We’re enabling a lot of the capabilities and the processes that they have or that they need to improve. That’s really our focus. But there is some potential longer-term and – but that’s not what we’re thinking about today. We’re really thinking about the pure life sciences, traditional pharma, biotech customer that we serve.

Great. Thanks, Paul. And then, Tim, can’t let you leave without asking you a question. As we think about the 3Q calculated billings guide, 245, I guess, look, a little light of Street. Help us understand, I guess, how much of that is maybe a pull forward into Q2? I think you mentioned early signings. Any potential kind of realignments or kind of one-off things we should be aware of in terms of the seasonality in the back-half?

Yes. Hey, Ken. So those are the two drivers there in terms of a bit of pull forward of deals we thought we’re going to close in Q3 got pulled into Q2. And then the other thing we talked about in the last two quarters is a better billing duration in Q1 and Q2, which means that those underlying seasonal renewal basis in Q1 and Q2 increase at the expense of the Q3 seasonal renewal base. So compared to last year, Q2 renewal base, we’re seeing it slightly lower, as we see a little bit more movement towards Q1 and Q2.

Got it. Thanks for the color.

Yep, Thank you.

Our next question is from Rishi Jaluria with D.A. Davidson. Your line is open.

Hey, guys, thanks so much for taking my questions. And, Tim, I echo everyone else and wishing you the best and it’s been a great pleasure working with you over the years. I want to start by asking about virtual conferences. So you had a few of them, if I’m not mistaken, commercial and whatnot. Given how referenceability is so important to the Veeva way of having customers share best – use cases with each other and best practices. How has it been from having virtual conferences and being able to have some level of referenceability in networking and being able to replicate that in a virtual environment? And then I’ve got a follow-up.

It’s working well. It’s working well. There are pros and cons. First, I do recognize we have good relationships with our customers and those are developed largely in the face-to-face day. So to some extent, we’re utilizing that. We wouldn’t – maybe are we – is it more difficult to develop new relationships in the virtual world? I think it is a bit. Now, having said that, we’re on the same footing with everyone else. So I think they’re getting used to that and we’re executing very well on our events. But we’re looking forward to seeing our customers in person again.

Great. That’s helpful. And then – and, Tim, when you quantify the 200 bps of savings from effectively $0 of T&E and not having physical events. And I appreciate that you’re quantifying that. I think you’re the first I’ve seen in software to actually try to put a number on that. But going even beyond this year, so we think post-COVID, if things do return back to something resembling normal, how sustainable are these levels of cost savings? In other words, is there kind of a more permanent shift to doing virtual selling in certain cases doing virtual implementations and training versus, again, doing that in person? Just how do we think about the sustainability of some of the cost savings that we’re realizing right now in this environment?

Yes. Rishi, I certainly don’t want to lean into any guidance for next year. But I think – I do think you’re hitting on a point in terms of the way we will work in the future. You heard Peter just talk about – you asked him the question about our customer events, and we certainly enjoy the engagement with our customers when we’re face-to-face with them. And I would imagine, our plan is to move those back to what they were before. On the travel side, I do think that you’re going to see some benefit. And I would say that across all companies, you’re going to see some benefit, because during this time, companies have had to get incredibly effective at using virtual means to connect. Does that save – instead of having three people travel to a customer, do you have one person and two people are connected via Zoom in the future? I think all those are possibilities. And I think we will benefit like other companies will benefit, albeit not to the extent we’re certainly seeing during this pandemic time.

Great. That’s really helpful. Thank you.

Our next question is from Stan Zlotsky with Morgan Stanley. Your line is open.

Perfect. Thank you so much, guys. Well, one question at a very high level. It’s been a little over a year since Metadata was acquired. What have you seen from them during that time? Because also in the meantime, you guys have managed to win two top 20 pharma in the Phase 3 – two customers since the acquisition. Maybe just qualitative comments on what you’re seeing there? And have a quick follow-up.

Stan, it’s Peter. Metadata is a strong competitor. They are the leader by market share in the space. We have not seen honestly a lot of change as it results to the acquisition to really focus on our own area. And that’s this innovation that’s bringing the whole clinical suite together from clinic operations integrated tightly with clinical data management, things that we’re doing with the clinical database and now MyVeeva for clinical trials. So I’m not seeing particular changes from Metadata, they’re still a strong competitor.

Okay, perfect. And just wanted to make sure that Tim was drilled appropriately on billings before he left. Hi, just following up on Ken’s question, could you help us maybe quantify some of the pull-forward that you saw on billings into Q2? And also maybe some of the concessions that you guys talked about in Q1 and Q2, any quantification there? I would appreciate. Thank you.

Sure. Stan, thanks for the question. So probably on the first one pull-forward, as it relates to billing, you’re talking about in the few millions area, not more material than that. We went into the pandemic with probably a thought like most companies, Stan, that there would be some requests from our customers around cash flow and billings changes. There are – overall, we’re not really seeing that very much. We didn’t see it too much in back-half of Q1 and we didn’t see it very much in Q2. Where we are seeing it is in some of the segments that I talked about, Stan, in the Q1 call some of the customer segments that we’re seeing. But it’s not as much as we would have expected, which I think is a testament to overall life sciences remains relatively healthy compared to other industries that other companies may be engaged with, Stan.

Got it. Thank you.

Sure.

Next question is from Brian Peterson with Raymond James. Your line is open. Brian Peterson with Raymond James. Your line is open.

Oh, sorry, confused by the mute button, again, but congratulations on the results. And Tim, we will miss you on these calls absolutely. But – so just kind of – by the way, no billings questions for me. But just starting out on OLS, it sounds like you’re adding to the customer base. I’m just curious what you’ve learned about some of the customers in the product fit and maybe competitive dynamics in those markets. And when we should we think about some accelerated go-to-market investments in outside of life sciences?

Hi, Brian, this is Peter. I’ll take that one. What we’ve learned is, our products fit is really working where we’re focusing the quality and the regulatory area, and we’ve kind of honed our motion into these industries. In terms of go-to-market, that’ll be gradual expansion as we go forward. Now remember, this cosmetics, CPG, it’s a big market and our products in there are good. But this is a reasonable sized market. This is about as big as clinical data management markets inside life sciences. So we’ll see steady increases, but nothing drastic.

Understood. And maybe just one question as it relates to geographies, I know with COVID-19, I think, there’s different trends across different markets. I’m curious if you’ve seen that manifest in your business at all? Just looking to get more color on things by geography? Thanks, guys.

Yes. By geography, I think, we’re pretty steady. We haven’t seen things. Now we see difference in interactions, right? In Asia, things have largely gone back to normal in many ways, visiting customers in person, employees getting together, U.S. not too much, mostly Europe not. But in terms of financial performance or business activity, no change to the geographic mix.

Our next question is from Sandy Draper with Truist Securities. Your line is open.

Thank you very much. Most of my questions have been asked. Maybe just a follow-up, this is probably for Paul. On the – on your comments around MyVeeva for Doctors, and you’re talking about how pharma company can partner up and get the information. I’m trying to understand is, if a doc has the app on a phone, and you have the four different pharma companies, are there four different instances of the app? Or I’m just trying to understand logistically, I mean, it’s a product setup where it’s one product for the customer, for the doctor, but you can have however many pharma companies sign up pushing information and interacting with the customer, or how does that get separated out between the different Pharma companies?

Yes. That’s a good question. And that is precisely the magic, what you just described right there. In fact, it’s one app on the device. That’s why it’s so powerful as one app and it’s one website. And they can be invited by one company and create a connection and then they’re on it. So one analogy, one thing that you might – you may think about from your everyday world is LinkedIn. Once you’re on LinkedIn, you’re on LinkedIn once, and you have one profile on there, and then you can start to connect with people. MyVeeva will have much of that same kind of model, where a doctor will get invited, they’ll create and set up an account one-time, and then they’ll be able to connect with anybody across all of life sciences through a single application. So that’s precisely why it’s different and why it’s so unique in the industry, because nothing else really exists like that. And then that relationship – the reason why one of the things that we see pretty consistently is that, digital kind of pure digital standalone without a relationship versus digital combined with a relationship, the combination with the relationship, it’s an order of magnitude more effective. So the perfect example for that is, when you look at the engagement rate with an e-mail sent by a human being, let’s say, approved e-mail versus the engagement rate from a corporate home office, it’s much, much higher with approved e-mail because of that relationship, and that’s also another kind of key point with MyVeeva. It’s combining digital with human relationships. So yes, really good, insightful question.

Yes. Okay, pile on there. Like Sandy, one of the thing to think about is this amazing contact manager, you go in there and you search, you’re searching for a brand, a company or a person and you find it and then you find all the things that are connected to that. That’s the way to think about it. Absolutely kind of revolutionary really.

Got it. That’s really helpful commentary from both of you, guys. And that’s actually my only question. Don’t have a follow-up. So I’ll step back in the queue.

Thanks, Sandy.

Our next question is from Tyler Radke with Citi. Your line is open.

All right. Thanks very much. Peter, I think the question is for you. I wanted to ask about the CRO customer. I think you signed a CTMS deal with your first top seven CRO. And I believe a quarter ago, you were kind of a bit more cautious just on the CRO segment in general. Obviously, they were facing some kind of greater COVID headwinds in the rest of your customer base. But maybe just walk us through that selection process. How you kind of see the CRO opportunity where we are and how big that ultimately could evolve to?

So CRO is very important for us, both, yes. They will use our software, but they’re also a channel for, particularly for our clinical data management area, right? They would sometimes do clinical data management for customers small and large. Yes, we were a bit cautious on the CRO because of their business got hit by COVID, because they couldn’t get out there, trials being stopped, that’s a pretty immediate hit. In terms of this deal or more broadly CTMS in the CRO area, it’s – they’re doing it and this customer, in particular, doing it for increased efficiency. That’s one. They have a lot of people. CTMS is the heartbeat of it. Their process and systems that they had before was not fast, it’s not configurable, it’s not user friendly, and they couldn’t get the information out of it that they wanted to. So it’s about efficiency. And the other part is they’re realizing that Veeva is connecting things together into a clinical network, and our clinical data management system is quite promising. So there’s a need for the CROs to be close to Veeva, unless they would like to, and some do, right? A couple try to develop their own technologies. But I think most are realizing that it’s probably better to align with an industry standard technology, which Veeva is becoming.

Helpful. And my follow-up, I just wanted to better understand kind of the linearity or just business by – business trends by quarter. Obviously, it sounds like here in the second quarter, you saw a notable improvement from Q1 trends. But kind of curious if that was – there was kind of a step function, increase in any given quarter, or it’s gradually increasing – improving trends by quarter and whether you’ve seen that kind of continue to go up into the right through August so far?

And Tyler, this is Tim, by the way. Just so I’m clear, are you talking about how the trends are shaping as – or during the pandemic? Is that what you’re asking about specifically?

Yes. Just kind of business activity by quarter – or sorry, by month throughout your Q2 and then obviously now we’re into your Q3, has that kind of continued if it was kind of steadily improving business trends?

Yes. I think that – I guess, I would say and, Peter, I don’t know if you want to add to this. I guess, what I would say is, we really have never had a strong linearity in a quarter as you see some software companies have. We work with our customers and they engage with us and buy from us when they need new users, new products and the like. As it relates to the pandemic, there was probably a bit of a pause as customers and software companies like Veeva got used to the new way that we are going to work during this time, Tyler. And that was a short pause, I would say. And I would say, coming out of Q1 primarily into our Q2, we’ve seen continued good demand. And I would say that continues into early August.

Thank you.

Our last question comes from David Larsen with Verity. Your line is open.

Hi. Tim, I think you mentioned in your prepared remarks that you had the best bookings quarter ever in one of your line items. Did I hear that correctly? And what was that line item, and what drove that performance? Thanks.

Yes. Sure, Dave. So, it was QualityDocs, which is in the Development Cloud area and the quality area. It is the content management-based application that focuses on all the documentation and documents needed to manage your quality environment within pharma. So very important part of the quality area. And I think it’s a combination probably of a couple of things. One, this is an area that we have become the clear leader in, and I think you’re seeing some enterprise companies leaning in as it’s becoming a priority for them. And secondly, we’ve seen quite a nice uptake in this area around the SMB market, the longer tail for the opportunity we have in front of us for the Development Cloud and products like this. So, combination of a couple of things and really underlining the fact that we’re the leader in this area as we’re moving forward.

Okay. And then just one quick follow-up. For the MyVeeva for Docs, it’s like great description on what that actually does, it sounds like there’s a lot of value there. Can you talk about the patient side of it? Like patients can already sort of dial in and sort of record how they’re responding to certain meds. They can already sort of record, I think, through the Internet, how they’re responding to certain meds on a clinical trial. How does the MyVeeva for patient side work? And what sort of new and novel about that?

MyVeeva for patients, they can do some things electronically. But, for example, well over 80% of just what’s called the electronic consent, meaning, the patient giving their consent to medical procedures right through data, et cetera. About over 80% of that is done by paper, signatures and faxes. So, it’s a really fragmented and there’s quite a few different applications for quite a few of these different things. So, it’s not a great world. It’s much easier to buy something on amazon.com than it is to go through a clinical trial as a patient. And that’s really what – that’s what it’s about bringing it all together for the patient.

Okay. And just one last one. For IQVIA, where are you seeing them in the market most frequently? Like, where do you see them? And how do you compete with them most frequently in the market? Thanks.

Yes. We primarily see IQVIA on the commercial side. We don’t see them so often in the R&D space. The – given what they’re kind of going to market with, they’ve been – had a particular focus on, as you know, the data side within primarily focused on commercial and then also they announced some software applications in commercial. So, we tend to see them there most, but not so much in R&D.

Great. Thanks so much.

And this does conclude the Q&A period. I’ll now turn it back over to Peter for any closing remarks.

Thank you, operator, I’d like to take this time to say thank you again to Tim Cabral. When our Veeva venture started together, Tim was our part-time bookkeeper and Veeva was an infant. And now 13 years of partnership later, here we are, a company that’s contributed in a major way to our customers, employees, investors and society in general. And throughout that, Tim has been steady and strong like a rock throughout the journey, and he has built an amazing team. So, Tim, you get my vote for CFO of the decade. Thank you, and thanks to everyone for joining us today. And I look forward to talking with you again at Investor Day online on October 29. Have a great evening. Goodbye.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation, and you may now disconnect.