Veeva Systems Inc. Class A

Thank you for standing by and welcome to the VEVA Systems Fiscal 2021 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I'd now like to hand the conference over to your speaker today, Rick Lund, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon and welcome to Viva's Fiscal 2021 First Quarter Earnings Call for the quarter ended April 30, 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-K, which is available on the company's website at viva.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, 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. VIVA 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 forum. The guidance we will provide today is in part based on our 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. On the call, we will also discuss certain non-gap metrics that we believe aid in the understanding of our financial results. The reconciliation to comparable gap metrics can be found in today's earnings release. which is available on our website and as an exhibit to the form 8K filed with the SEC just before this call. One final note, concurrent with our earnings release, we have posted an investor presentation on our IR website. It contains a summary of our Q1 and recent historical financial results and our updated guidance. We will continue to provide these materials on a quarterly basis going forward as a helpful reference for those interested in our business. With that, thank you for joining us, and I will turn it over to Peter.

Thank you, Rick, and thanks to everyone joining us today. Before I give an update on the business, I would like to extend our sympathies to all those who have been affected by the pandemic. I would also like to thank our customers who are supporting healthcare professionals and patients and working around the clock to produce diagnostics, equipment, vaccines, and treatments for COVID-19. We had a strong first quarter with results coming in ahead of our guidance. Total revenue was $337 million, up 38% year-over-year. Subscription revenue grew 36% year-over-year, and our non-GAAP operating margin was 39%. We are slightly decreasing the top end of our full-year total revenue guidance by $10 million to $1,395,000,000 and raising our full-year top-end operating income guidance by $10 million to $510 million. This is due to changes related to COVID-19 in certain segments of the business, particularly in the physicians' world and the cross-ex areas, where in-person events have largely stopped and advertising is down. This also reflects lower costs related to travel. Tim will discuss our guidance in more detail in his sections. This crisis has caused significant disruption, but it has also promoted innovation throughout the industry and Aviva, which over time will be beneficial for Life Sciences and for Aviva. I am more confident than ever in our long-term opportunity and our ability to achieve our $3 billion revenue target in 2025. The effects of the pandemic have been far-reaching, and the world is looking to Life Sciences companies for solutions. The industry is less effective financially than many others and remains relatively strong overall, but it is certainly a time of significant change as many of the industry processes become more virtual. Healthcare providers and patients are delaying many non-essential visits and elective procedures. When comparing February to April in the U.S. using Cross-X data, doctor visits were down by more than 50%. This is impacting some life sciences companies more than others depending on their product portfolio. Many clinical trials have been delayed to avoid non-essential patient visits to doctors. In-person visits by sales reps or clinical research associates to doctors have also largely stopped. These changes are causing patients, doctors, and the industry to rapidly adopt digital strategies. Necessity is creating innovation. Using CROSIX data, we see that telemedicine increased rapidly in the US from less than 1% of doctor visits in February to more than 30% of visits in April. Doctors and patients are getting used to a mix of in-person and digital interactions and are finding it productive. Using VIVA Pulse data from VIVA CRM, we see that in the US, remote meetings between pharma and doctors with VIVA Engage are up more than 30 times and approved email communications are up more than two times from February to April. Doctors are telling us they find digital meetings effective and they look forward to a mix of in-person and digital interactions once things get back to normal. It's good to see the healthcare systems and the life sciences industry evolving so rapidly. It was a very busy quarter for Viva. We executed our first ever entirely remote product releases in both CRM and bulk. We made major changes to our product plans to release new digital capabilities customers need most right now. And our team in the field did an outstanding job supporting customers around the globe, ensuring existing programs stayed on track, getting them live quickly with new digital capabilities, and helping with many COVID-19 related special projects. We also quickly and effectively turned all our customer summits through the end of the year into virtual events. Q1 has been our greatest quarter of innovation so far, with innovations coming in all areas of the company, from product to sales, services, and marketing, right through to HR and finance. I am so proud of the Veeva team, and I'm personally thankful to be working around so many bright people executing together as a team. I'd like to touch on two big new areas of innovation, Data Cloud and MyVeeva. We had a major announcement for commercial in March with Viva Data Cloud, planned for the U.S. by year-end. Viva Data Cloud will bring a better solution for patient data to the industry. This is a large, underserved area and ripe for disruption. Like the other markets we've entered, we aim to bring much-needed innovation. Viva Data Cloud is powered by the Crossix Data Platform, which gives us a distinct advantage. It's a world-class technology platform built for the development and delivery of large-scale patient data and analytics, all in a privacy-safe way. Customer feedback on Data Cloud has been very positive, and we've already signed our first two early adopters for pilots, one emerging biotech and one top 20 pharma. Over time, we will expand Data Cloud to more data offerings and countries. The CROSIC data platform could be as important an asset to Viva as the Vault platform is. But just as we saw with Vault, it will take us many years to become the market leader. We are starting in a focused way around patient data for the U.S. market. We will concentrate on early adopter success and product excellence and grow from there. Just two weeks ago at our R&D customer summit, we announced MyViva for clinical trials. This is our first patient-facing application. It will help patients through the clinical trial process, from managing medications and appointments to participating in remote doctor visits. MyViva will enable clinical research sites around the world to eliminate paper and deliver a better patient experience. The product is planned for release in Q4 and will be free for clinical research sites. MyViva has the potential to remove most of the paper from the clinical trial process, and transform the patient site and sponsor experience. We are very excited about MyViva. We also reacted quickly in the quarter to add remote sample request management to Viva Engage and remote source monitoring to Viva SiteVault, our solution for clinical research sites. We are already seeing significant use of these new digital capabilities. Overall, we are changing our product roadmap to add more digital capabilities and products, and we are helping customers define and operationalize their new digital strategies. It's an exciting time to be in the industry and at Veeva. In uncertain times, people look to join high-quality companies and companies look to partner with other high-quality companies. We are seeing both trends play out for Veeva. We have been able to attract great new talent and see an increase in qualified inbound candidates and faster interview cycles. Our customer relationships have always been strong, but now they're getting even stronger. We are deepening our partnerships and seeing greater collaboration around long-term roadmap. Customers appreciate how well Viva has executed and gone the extra mile in this time of change. Now I'd like to share a few additional highlights for the quarter by area. It was a very active quarter for commercial cloud. Veeva CRM continued to gain market share as we added 10 new SMB logos in the quarter and saw further expansions at enterprise customers. Open data also had a record number of wins in the quarter. Adoption of approved email and engaged meeting was very strong. And commercial cloud expanded in important ways in digital and with data cloud, as I mentioned earlier, and also with CrossX Veeva. to better connect sales and marketing. We are bringing Viva CRM field activity data into the Cross-X Diva marketing analytics solution to give brand marketers insights into how sales and marketing activities are working together. For example, brands can see the impact of media campaigns on doctors recently called on by the field. We have a bold vision for commercial cloud. The acquisition of CrossFix and the announcement of Data Cloud is a big start. Commercial Cloud is about connecting customer-facing teams, leveraging data and digital, and solving for the specific needs of each major country and region. This is the type of strategic partners the industry needs in commercial. Our approach is resonating and giving us the opportunity to engage in even broader strategic planning with our customers. Turning to Vault. We just held our very first virtual summit two weeks ago. It was our R&D event for Europe and the feedback was very positive. We more than tripled attendance from last year and we're pleased to see the online event was really effective in advancing customer success and for restaurant selling. In looking at Vault development cloud progress, customers continue to adopt more Vault applications. Vault Quality Suite is a good example and had a very strong quarter. highlighted by another top 20 pharma selecting quality docs as their enterprise standard. This marks the 11th top 20 to select quality docs. Clinical is another area where customers are standardizing on more vault applications over time. This quarter, an existing top 20 pharma customer for CDMS, ETMS, and study startup will round out the full vault clinical suite by adopting CTMS. Additionally, another European top 20 decided to adopt ETMF and Study Startup as its enterprise standard after standardizing on RIM in Q4. We also announced that five of the seven top CROs have joined the Vault CDMS Partner Program. This is a very significant announcement and shows the increasing momentum of our CDMS product. Sponsors and CROs alike see that Vault CDMS has the potential to transform clinical data management. Now to our work outside life sciences in cosmetics and consumer goods. These industries have experienced major impacts from COVID-19. Cosmetic companies have seen a significant drop in demand, while CPG companies selling essential products have benefited from consumer stockpiling and have seen higher demand for certain products. Our team continues to execute well, This quarter, a new top 10 CPG company selected Quality One for an initial deployment. Since the onset of the pandemic, this customer has experienced a rapid spike in demand. To secure their supply chain, they needed to quickly establish and track testing and auditing information for their suppliers. Our team was able to deliver a supplier quality management system within three weeks. So our outside of life sciences business is experiencing some disruption due to COVID-19. I'm very proud of how they've continued to build Viva's reputation for customer success and as a trusted partner within these new industries. I'm also happy to announce that we've completed our search for our new CFO. They will start at Viva in early June. We will issue a formal announcement and share further details at that time. Tim is staying on to ensure a smooth transition and will remain an advisor to the company after the transition is complete. These have been tough times for everyone, but it's been inspiring to see what the industry and the Veeva teams have accomplished in such a short amount of time. I have never been more confident in Veeva's future. With that, I'd like to turn it over to Tim.