Veeva Systems Inc. Class A

Ladies and gentlemen, thank you for standing by and welcome to the Beavis Systems fiscal 2023 second quarter results 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. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Atto Garrett, Senior Director of Investor Relations, You may begin your conference.

Good afternoon and welcome to VIVA's fiscal 2023 second quarter earnings conference call for the quarter ended July 31st, 2022. As a reminder, we posted prepared remarks on VIVA's investor relations website just after 1 p.m. Pacific today. We hope you've had a chance to read them before the call. Today's call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer, Paul Schella, EVP Commercial Strategy, and Brent Bowman, our Chief Financial Officer. During the call, we may make forward-looking statements regarding trends, our strategies, and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. 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 10Q. Forward-looking statements made during the call are being made as of today, August 31, 2022, 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 may discuss our guidance on today's call, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. On the call, we may 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. With that, thank you for joining us, and I'll turn the call over to Peter.

Thank you, Atto, and welcome everyone to the call. We had a solid Q2 with revenue ahead of our guidance and operating income at our guidance. Total revenue was $534 million, up 17% year over year, and subscription revenue was up 17% to $429 million. Non-GAAP operating income was $202 million, or 38%. We've revised our full-year revenue guidance down by about 1.5% at the top end, from $2.175 billion to $2.145 billion. due to foreign currency and macroeconomic factors. We executed well in the quarter. Hiring was good, our innovation engine is working well, and our customer relationships continue to get stronger as we have more solutions to offer and each of our solutions gets better. Our competitive landscape and product strategy also have never been stronger. We continue to track ahead of our goal to cross $3 billion in revenue in 2025 and have planted seeds for a long runway of growth well into the future. We'll now open up the call to your questions.

At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from Kenneth Wong with Oppenheimer. Your line is open.

Hey, fantastic. Thanks for taking my questions. I've got one for Peter and then a follow-up for Brent. Peter, you mentioned drug pricing legislation in your prepared remarks, and I realize it's a while away, but would just love to get your take on maybe where that could impact the industry. Is it more on the commercial side where maybe pricing causes more headcount reductions, or is it on the clinical side where perhaps the opportunity looks less attractive and we see less investments in that area? Would love to get your take on that.

Yeah, on the drug pricing, first, to put it in perspective, this is specific to the U.S., and that's a big part of life sciences, but certainly not the whole part of it. And then it has to do with Medicaid, which is roughly about half of the U.S., and it doesn't have to do with private insurance. And it's about the top X drugs, and it gets implemented in 2026. It's too early to say how it plays out over the long term. In the short and medium term, you know, it's steady as she goes. There's no changes. And we just have to see how this works out over the long term. And you had a follow-up question for Paul as well?

No, follow-up for Brent. Brent, when I look at the guidance, I guess I just wanted to get a sense for kind of what you mentioned headwinds in the pipeline in June. You know, how did that look exiting July? Did that stabilize? And then when thinking about the guidance, are you assuming that it worsens or kind of stays at the current level?

Yeah, so thanks, Ken. So yeah, in June, we started to see some of the macro factors of plan, and that continued in July at a similar pace. If you take a step back, you know, from a revenue guide perspective, We're growing revenue 18% after normalizing for FX, so we're pretty happy about that. If you unpack the reduction, about half of the reduction is related to FX, as the dollars continue to strengthen over the last 90 days. The other half relates to the overall macro dynamics. Specifically, it's impacting commercial a bit more. We've seen some impact at CrossX as advertising budgets have have tightened a bit. And we've also saw a little bit of lower add-on users from SMB customers in the CRM and bulk commercial. But I want to point out that R&D has not really been impacted by the macro. Most of the R&D products are not priced on a per unit basis, per user. They're priced more on an enterprise agreement. So really no long-term change in the overall business or the competitive environment. What we've seen in the change in our guidance reflects specific FX impacts and macro environment.

Got it. Perfect. Thank you for the call.

Yep. Your next question comes from the line of Brad Sills with Bank of America. Your line is open.

Oh, great. Thanks so much for taking my questions. I wanted to ask about, you know, one on just some of the activities you saw this quarter and then another one on the macro, please. Maybe just to start, you know, in quality in particular, it stands out, 52 wins this quarter. and it sounds like R&D is holding strong despite the macro. What would you say the footprint looks like for those initial wins? Are they starting small and this could potentially lead to some bigger upsell deals down the road? Is it kind of quality first wins, if you will, that could potentially lead to bigger add-on deals?

Yeah, I'll take that one. It's really a variety in the quality area across those customers. So the big picture of what's happening is We picked a good product strategy a number of years ago to have a suite of quality products all on a common platform. So quality docs, QMS, training, and now we've introduced LIMS, Laboratory Information Management. We've announced that. So we're really the only company that has that integrated suite of products. And then we have a good account coverage as well. And, you know, we're just executing. So, yeah, it starts – it can be – A small biotech that the only thing they need from us at the very beginning might be quality, or it can be a new customer that's an established customer that just happens to be starting in one of our product areas in quality, and then they're going to add multiple product areas in quality. Or it could be a customer where quality is the first area, and it's going to lead into clinical and regulatory and others. So I would say it's an even mix across all three, and it goes across segments. enterprise, SMB, pre-commercial, goes over into medtech as well.

That's great. Thanks, Peter. And then, Brent, one for you, if I may, please, just on the guide for billings, 9% growth, it looks like, for Q3, a pretty meaningful deceleration. Could you just help us unpack currency versus macro in there? And then just within the macro, it sounds like you're not assuming, or you haven't seen R&D impacted here as more commercial side. Is that what you're assuming kind of in your guidance going forward? Thank you.

Yeah, I don't recognize the 9%. I can talk to the numbers that we have. I believe on a constant currency basis, you know, we're guiding closer to 17% for billings in Q3. But what we're seeing is the billings, the reduction in the second half has really been a factor of two things. One is FX, similar to revenue, as well as the macro. On the billing side, about a third is related to FX, again, to the strengthening dollar. And then the balance is related to predominantly commercial again. So we talked about the Trosix piece a second ago, and some lighter in uptick in number of user add-ons. R&D remains strong. So we're happy overall with the strength of the business and guidance. 18% billings on a, you know, adjusted for FX and billing term changes.

Thanks so much, Brent. Yeah, thank you.

Your next question comes from Rishi Jaluria with RBC Capital Markets. Your line is open.

Oh, wonderful. Thanks so much for taking my questions. First, I wanted to start out by just better understanding kind of some of the puts and takes of the guidance in the back half of the year, because if we take guidance at face value right now, be it billings or subscription revenue, the idea of reacceleration in the back half of the year seems to be off the table for now. Is that the right way to think about it, you know, longer term? Or is there still kind of a scenario where we can see overall subscription growth re-accelerate above 20%? I'm not asking for guidance for next year. I know you'll provide that next quarter. But maybe just how we should be thinking about the potential for re-acceleration, and then I've got to follow up.

Yeah, so FX, you know, Rishi, it definitely had an impact. We called out slight acceleration with expectation and revenue. in the prior guide, and that has been challenged by the FX and the macro. The underlying business remains as strong as we thought 90 days ago. So that is unchanged. The competitive environment, it's in our favor as strong as ever. So I would think about it that way and also think about the opportunity ahead. We're still early days in a broad opportunity across R&D as we are – operating system for DevCloud. And then in commercial, we have a lot of opportunities as well, if you think about data cloud and link and the like. So a lot of growth opportunities in front of us.

Okay, got it. That's helpful. And then maybe I just wanted to think about, you know, in the prepared remarks, you call out maybe some headwinds on the SMB side. I guess I'm a little surprised to kind of see that, you know, just given, you know, how big your customers and how big they're spending with you is. Can you maybe help us understand directly how much of your business is what you would call SMB and how you're defining that just so we can kind of better understand the model going forward, especially in this macro? Thank you.

Yeah, sure. Happy to. It'd be good to kind of take a step back. So first off, I know Pharma represents about 90% of Viva's overall revenue with the balance being MedTech and CPNC. And we think enterprise customers represent roughly 60%. of our total pharma revenue. And we define enterprise as the top 50 or so largest pharma companies. So the balance of that is S&B, which is roughly 40% of the total pharma. And this is made up of a wide range of different customer types. You have small 100-person startup companies all the way to a billion dollars in revenue. So that's how we're defining it. And pretty commercial is a small percentage of that.

Got it. That's really helpful. Thank you. You bet. Your next question comes from Saket Kalia with Barclays.

Your line is open.

Okay, great. Hey, guys. Thanks for taking my questions here. Brent, maybe just start out with you. Can we just talk a little bit about how the all-in Viva deals are playing into this guide? In earlier quarters, I know that those were obviously very big and very complicated deals that take a while. Are we assuming longer sales cycles for those or lower sizes? Just curious if you can tie those two things, the all-in-Viva deals and the billings adjustment for the year.

Yeah, no, happy to. So what we've seen is some increased deal scrutiny. And that's on a deal-by-deal basis. That could impact various sizes of deals. So, you know, that's playing into our guide for the year. And I think you're referring to a large deal we booked back in Q1. So, yeah, I wouldn't say there's anything significant changing large deals other than some general additional deal scrutiny.

Got it. Got it. That's helpful. Peter, maybe for my follow-up for you, I was wondering if you could just dig into the CrossX business. a little bit more. I mean, remind us kind of what are the bigger offerings there and sort of what's changed in sort of this, you know, this downtick in the macro, if you will.

CrossFix has a few different parts to it. It's all related to advertising. Some of it is measurement, how are your advertising going, and some of it is more programmatic, which is you can buy audience for us, from us patient audiences, So there's a lot of details to the CrossX offering, but at the macro level, due to the macro environment, people spend a little bit less in advertising, and so that flows through to CrossX. I would say we're real bullish on CrossX going forward. When we bought it about three years ago, the idea was to use it to develop data cloud, but also to integrate CRM and CrossX so we can help the industry bring together sales and marketing. And that's really playing out. So we're increasing our revenue in Cross-X overall, and we're making it a broader offering and even establishing a new type of pattern with some customers where a certain percentage of Cross-X is done as an enterprise agreement, a baseline measurement agreement. Therefore, it'll be a little less variable as we go forward. But these changes take a while to play out over time.

Makes sense. Thanks, guys.

Thanks.

Your next question comes from Keith Weiss with Morgan Stanley.

Your line is open.

Excellent. Thank you guys for taking the question. I have one guidance question and one more product question. On the guidance side of the equation, I mean, overall, excess tax billings coming down by $35 million on a $2.3 billion base isn't huge. It's not a very big impact. And the question I've been getting more from investors isn't, why are they taking numbers down? It's like, are they taking numbers down far enough? Is the forecast conservative enough? So maybe for Brent, you could help us garner confidence that this is the right cut, that no more is going to be necessary on a go-forward basis, and give us some confidence that the numbers have been de-risked on a go-forward basis. And then on the product side, I was wondering if we could dig into Data Cloud a little bit. Are there frictions there that could potentially get taken away on a go-forward basis to sort of have that progress faster? Or does it just take time to sort of get through, like, the network effects that the existing incumbents in that space have? Can you talk to us about, like, what can speed up or slow down progress with Data Cloud?

Yeah, so let me take that first one, Keith. So, you know, consistent with our guidance philosophy, you know, we take all the best information to give you the best view we have of the business today. You know, and we have a broad portfolio of customers and products. And so we have, you know, pretty good visibility into our pipe at various stages. And we have active conversations with our customers. So we have a sense of the pacing of what they're looking for. So we've factored all that in and we've considered, you know, FX, the current rates they're at. We've factored in that there is some increased deal scrutiny and also some lower spend in SMBs. So that was all informed in our guide for the year.

Keith, I'll take the second part of your question around data cloud. So first, just defining data cloud at the highest level. Data cloud is open data, link, and compass. I think you may be referring to Compass, but let me hit each of them really quickly. Open data is our customer reference data, steady grower. That's been around for a while. LINQ, we announced that a number of years ago as one product, LINQ for Key People. That has really great momentum, momentum in the enterprise and the SMB. We also announced four additional LINQ products, which are getting, you know, they're all in the very early stages with early adopters. but they're getting a lot of excitement because of the momentum we've created with that first link product. So link, family of applications, that's doing really well. And then the third area, which I think you may be referring to as driving additional speed, is Compass. And Compass is, remember, that's our patient data. That's what we launched first, then prescriber. And over time, we'll have sales data in that area. We're really focused on the patient data side. Think about the Compass. Compass is really a marathon for us, right? We're in the very early stages with patient data. It's progressing well. We had four customer wins there. And the way to think about a customer win is they'll start with a brand, and that brand will have a couple of use cases, and they'll buy our data for those use cases. It could be something like defining the patient journey, understanding how to treat patients. It may be finding more doctors. based on the patients that they treat. That's what they would use it for. We have to deliver customer success in those areas. And then once we deliver on that, we will expand within that brand team, maybe additional products, and then also across brands, selling new products to other brands in that company. So you can see it's kind of stepwise. It will take time for us. You know, we're accelerating in that space. We're highly focused on it. And, you know, we think all the time about things about how we can, you know, kind of further accelerate in there, and we're executing on most of those. So I'm happy with the execution. It's going well. But that gives you a sense of what's in data cloud. And all these feed on each other, right? All the products are connected together. So we think we have the right product strategy, and we're going to continue to execute that.

That's super helpful, guys. Thank you. Your next question comes from Gabriela Borges with Goldman Sachs.

Your line is open.

Hi, good afternoon. I have a question for Peter or for Brent. I'd love to revisit the trajectory of the core CRM business, the piece that's based on seat-based pricing. I know you've been pretty consistent in saying that new customer seats will more than offset rep reductions. Could you remind us, do you think we're through the largest headwind of the rep reduction dynamic? Does returning to in-person selling post-COVID help with this?

How do we think about the structure of that specific piece of commercial going forward?

Yep. So, regarding the commercial space. So, we still believe that, you know, that 10% is the right number over time. We haven't seen anything that has changed that view. But we do expect to continue to take share. And as we take share, that the impact of VEBA will, in fact, be less overall. We feel good about our ability to continue to expand the footprint of CRM as well as our add-on business associated with it.

Thank you. The follow-up is on CDMS.

A couple of comments in the prepared remarks. I know there was a customer win announced in the quarter as well. We'd love to get a little more detail. How should we think about the trajectory of CDMS, and is there a scenario where that becomes more significant, more material driver of growth? either in the next 12 months or perhaps in the next 24 months?

I'll take that one. CDMS, I would say really happy with the progress in the quarter. And why do I say that? It's just the momentum, especially in the enterprise segment. The customer success with a couple of large enterprise customers we have and the progression of the sales cycle with some other enterprise customers gives me a lot of confidence. Our goal there is to be the leader in that area over time, and I think we'll get there. Then that also leads into our digital trials, right? You have success in the core CDMS area. There are other products adjacent to CDMS, which is the ePro, you know, patient-reported outcomes, that type of thing, the recently purchased randomization and trial supply management as well. So there's a lot of adjacent things, so... I couldn't be happier with our progress. And that one also, that one's like Compass. That one's a marathon, but we're ahead of the game. I think most people would say he was going to win that race. It's too early to call that race for Compass because we're just getting started. So very different, Compass and CDMS.

Thanks for the comments.

Your next question comes from Dylan Becker with William Blair. Your line is open.

Hey, guys, thanks for taking the questions. Maybe first for Peter, I think there was something in the prepared remarks relative to the growing number of customers with that vision for a unified platform. It's not something that's necessarily going to happen tonight, but obviously you guys are heavily embedded in that strategic discussion. So maybe can you talk about the progression of that roadmap, what the future adoption can look like, and how you can assign maybe some of the value with some of those earlier tools to support that broader platform standardization over time?

Yeah, it's a good question. So big picture, you know, we're getting more products and each of the products are getting better and we're fitting them together very nicely. And we saw that with DevCloud first, where we thought, oh, I guess six years ago, four years ago, we started really painting this big picture and now we're just executing on it, right? Just executing. Commercial, we're doing that now as well. We made a lot of progress this year. So we have good, stable, happy customers in CRM and in commercial content, and we're leveraging that for success in these big new areas. CrossX, Data Cloud, and actually our business consulting, which is our business consulting is going well. We started it three years ago, and it's quite profitable, and it has 150 people. So what we're seeing is Our product strategy is right on the commercial side and on the R&D side, and we're executing well. I was really encouraged by this quarter because we just executed well. And the macro environment actually helps us for the long term because during this time, there's a flight to quality with customers and with employees. So more rehires, more hires, getting more people, planting more seeds for future growth. Those things all last, you know, they all ladder up to a more strategic relationship. When you have more excellent products, they fit together better, you just get more excellent relationships. And the macro, you know, that happens. I've seen it a lot. I'm one of those guys. I saw the dot-com boom and the dot-com bust. I even saw Y2K and that thing, you know, the financial crisis. And now we see COVID, right? COVID happened and then the overspending by government, the inflation, the correction, the war and you train, etc. But you get through these things and it's really about, it's just about execution. Do you have the right blueprint of what you're doing? Can you stay focused? Can you execute with excellence in the product and the field? Then you do okay. So that's why you hear optimism from me because I feel like, you know, we got a plan and it's working.

Yeah, and maybe if we could follow up on that to a certain extent as well, too. You highlighted a lot of kind of the ongoing innovation, a number of new product announcements, and the strategic value of that business consulting segment, maybe to the point not where it drives decisioning today, but relative to that potential value capture. And maybe that is in an area of growing incremental reliance on Viva to say, hey, we want you to develop more of these kind of capabilities and solutions, obviously, to go out and to capture more of the overall opportunity, but to continue to expand and develop that market, speaking to your point on the long-term maybe favorability from what you guys are seeing today as well.

Yeah, I agree with you. It kind of, business consulting completes a picture for Viva. Strategic discussions about, with our customers, how can they change their go-to-market emotion? And that leads into both being able to introduce our products, but also to influence our products because we have a very tight relationship between our consulting group, our product group, and our sales group. The feedback loop is very tight. And I don't know about every company in the world, that's for sure, but I don't know about any company that has this mix inside one company, and it's really feeling good.

Thanks, guys.

Your next question comes from Kirk Matern with Evercore ISI. Your line is open.

Yeah, thanks very much. One for Peter and one for Brent. I guess, Peter, just to start, you mentioned a second ago that the macro actually might help you a little bit. I was just kind of curious on the R&D side. I know you haven't seen anything yet, but is there any chance of reprioritization around certain products maybe moving up? the priority list for your customers in a tougher environment versus where they might have been in a more normalized environment. I know it's sort of a hard thing to guess that, but I was just kind of curious if you're seeing that perhaps at the top end of the funnel at all. And then Brett, just on your comments about small businesses, are you referring specifically to some of your smaller biotech customers? The reason I ask is I assume most of those are more R&D customers, not necessarily commercial customers. So I was just curious if you could clarify that a little bit. Thanks.

Yeah, the first question there. I guess for sure in this environment, it's not great to be selling nice-to-have products, right? Those are the first to get, you know, the downturn. And we don't have a lot of nice-to-have products. We have real foundational ones. So I would say, you know, things are looking good for us. The advertising, which is, you know, the CrossFix-related business, that's required over the long term, but you can modulate it up and down. so our product footprint is more about building its building capabilities for the long term not nice to have it's acceptable a little bit here when you when you have these hiccups in the macro causes people to reassess a little bit okay what's going on but where you really don't want to be is in in nice to have products that doesn't work well in this environment

Actually, just to follow up on that, I was actually referring to your product portfolio, meaning I realize none of your products are going anywhere. They're all foundational. But I was wondering, even within your R&D product portfolio, are there things that might become more of an imperative in the short term versus others? That might not be the case, but I was just curious.

Yeah, it's an excellent question. No, not really, because they're all pretty foundational, and they're in their areas. You know, if you're in safety, that's the most important thing to you. If you're in the clinical data management area, that's the most important thing to you. So there's no particular boost or slowdown in any particular area.

And then, Kirk, to your second question, we did see some of that. We talked about lower spending in SMBs, and that's more in the lower half of that SMB. definition that I was describing before, because that SMB space is a very wide space. But our pre-commercial exposure is really relatively small.

Thank you, Kurt. I was just reflecting on your question, Kurt, and give you a bonus answer here. In terms of the products, it has more to do with just the natural cycles in the industry, which run longer than the temporary macro. So, for example, some of the best progress we've had in the last year is actually in our regulatory, in the upper end of the enterprise, in the regulatory area. And that's just a function of us having good products and customer success, and the industry just, it's a natural, we're approaching that second replacement cycle. So it's more the natural rhythms rather than the macro.

Thank you all. Your next question comes from Tyler Radke with Citi.

Your line is open.

Yes, thanks for taking the question. I wanted to ask you just in terms of the linearity in the quarter, kind of how that tracked and when you started to notice the slowdown in your pipeline. And then just to follow up on Kirk's question, I guess if we look at your R&D guidance for the full year, It did come down slightly. I presume some of that was FX, but you also didn't take up the revenue guidance. So I guess, you know, are there certain portions of the R&D portfolio that are seeing deal delays, perhaps CDMS, where the deal sizes tend to be larger? Just help us understand the moving pieces there and any comments on linearity. Thank you.

Yeah, so there's a few questions there. So on linearity, we started to see some of the impact in the later part of June. So that was where we started to see a little bit of the headwinds from a lower spin in SMBs and a little bit of additional deal scrutiny. So the quarter started out a little bit more typical and then we started to see that later in the month of June. And then related to R&D, if you exclude the impact of FX on a full year basis, it's closer to 32% growth full year. So we're very pleased with what we're seeing from the momentum in the R&D space. Now, they're not completely immune to either additional deal scrutiny. So if it's a large deal, there could be additional levels of approval and inspection on that. But we have not seen anything significant in the R&D space.

Great. Thank you.

Your next question comes from Ryan McDonald with Needham & Company. Your line is open.

Thanks for taking my questions. Maybe first, on the commercial side of the business, you know, we've recently in some of the checks, as we're thinking about budgets for calendar year 23, picked up that some budgets are starting to remain sort of static on a year-over-year basis for sales and marketing. Just curious if this is something that you're a phenomenon you're seeing as well, and perhaps how does that impact how you're thinking about beyond back half of the year and into next year, particularly on that commercial side of the business. Thanks.

Yeah. Hey, Ryan, this is Paul. Can you just repeat this specific phenomenon? It kind of broke up when you said that. What are you seeing?

Yeah. Yeah. In some of our checks, we're starting to pick up that as we look at budget planning for sales and marketing heading into next year, that budgets are sort of remaining static rather than growing on a year-over-year basis. And so as to put that in the context of, of sort of the guidance updated guidance today, you know, how does, are you, one, are you seeing that? And two, what does that potentially say about, you know, the prolonging of any headwinds on the commercial side of the business? Thanks.

Got it. Okay. Thanks, Ryan. Thanks for getting that. Yeah. You know, we're, we're most of the industries entering their budget planning cycle right now. So there's a lot of those conversations are kind of hitting full swing in most life sciences companies. And no, I have not heard or seen that yet. You know, it's just, again, like Peter talked about, a lot of what pharma does is, you know, these longer cycle, longer planning kinds of things. And we haven't seen any indication that budgets will be impacted next year. So we haven't heard that yet, you know, but time will tell.

Thanks. And maybe just a quick clarifying question on the SMB commentary. Are you seeing any churn at the SMB level or is this more of a lack of expansion in spend at the SMB level? Thanks.

Yes, it's mostly a lack of expansion. So the add-on of additional CRM users, add-on of Chrome match users. There is always some level of churn that happens. You don't see it, but companies get acquired, as one example, or companies go out of business, or they go up, or they go down. That is very natural. It's very common. It happens every single quarter. That was not unusual in this quarter. It was more what Brent had referenced earlier.

Thanks for the color. Your next question comes from Jack Wallace with Guggenheim.

Your line is open.

Hey, thanks for taking the questions. Got two of them for you. I realize we collectively hit the guidance question pretty hard here. I just want to tease it from a different angle. Are there any geographic areas, maybe in particular the Eurozone, where decision-making is slowing more than others? And then I've got to follow up.

Yeah, we're not seeing anything particular in a specific geo that was worthy of calling out from an additional exposure perspective.

Got it. Thank you. And then, you know, if you think hiring quarter has called out on a couple of occasions that, you know, Viva's a good place to work and potentially some of the smaller, previously faster growing public or private companies may not be as attractive to some of that talent. You're thinking about talent leaving and there being multiple compression, particularly in the private markets. Looking at your balance sheet, you've got nearly $3 billion in cash. Has the M&A pipeline picked up much? Are we getting closer to potentially doing a couple more deals? Just thinking about capital deployment. Thanks.

Yeah, I'll take that one. Certainly, the hiring environment is better now than it was a year ago. In terms of M&A potential, yeah, when the valuations come down and the speculation comes off a little bit, it is a more attractive M&A environment. And so we're looking, but we're always patient. We have so far 100% track record of success on our acquisitions. That's hard to do. So we're a bit careful and surgical, but we're looking. And when you're looking, you might find something, but you don't know exactly when you'll find it.

Thanks again.

Your next question comes from Joe Vrulink with Baird. Your line is open.

Great. Hi, everyone. Just to peel back the onion a little bit more on commercial performance, the 17 million lower subscription revenue guidance, most of that seems to be coming in the second half. specifically apply that to what I imagine the cross-ex revenue basis? It implies a rather large change in cross-ex performance. Is that directionally correct, and does it just speak to the extent of kind of ad budget changes that that business is seeing?

Yeah, if you take a look at the reduction, half of it is FX-related. And then you can kind of split the other balance between Crossix, which you called out. There was a little bit more pronounced impact to the Crossix business. And then the balance would be more broadly. So I think your observation is a good one.

Okay, great. And then I know we've kind of asked this question a couple of different times, but based on your operating history and being through ebbs and flows in this industry, Does it stand out to you that there's specific areas of your business, you know, it seems like it's falling exclusively in commercial that are getting caught up in the macro where, you know, R&D is forging ahead 32% organic and the enterprise commercial solutions like align events, data, you know, those don't seem to be changing. Is that kind of in line with what you would expect to be resiliency or is there the potential that maybe those things just see effects but with a lag?

So, you know, I think where we're seeing the impact today is, you know, as you mentioned, more on the commercial side where it's more user-based, you know, consumption. So that modulates a bit more in the macro. So, again, it was more pronounced in Cross-X, and we saw it with some of our add-ons business. So, you know, within the year. We haven't seen it on the R&D side. On the longer-term ELA-type business, Those are longer, really strategic type deals, and they're less likely to be impacted, I would say, over time.

I would add it has to do with the maturity of the product as well. CrossFix being a special case, I can go up and down with the advertising. If we look at our very mature and high market share products like PromoMats, the commercial content, CRM, That's where you're going to see it a little bit more. You have to remember in these other growth areas where we're just getting started, so data cloud, including Link and Compass in there, business consulting, and then the R&D area, safety, CDMS, these new quality products. That's where it's mostly just about capturing new market share, and we're not as susceptible there. That's just the natural cycle of getting your early adopters live and happy, getting the value out there, and then capturing the market. That area has more to do with the competitive environment than it has to do with the macro.

Thank you very much.

As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. Your next question comes from Jessica Long with Raymond James. Your line is open.

Hey, it's Brian Peterson. So, Brian, I just wanted to follow up on some earlier questions. I appreciate all the disclosure on the S&B business, but if we had to think about where you're seeing the most pronounced weakness there, is it actually with the larger end of that S&B that are more commercial where there's a more pronounced impact? I'm just getting questions from investors because I think a lot of people thought maybe the S&B exposure was was more R&D focused, just given the pre-commercial nature. So I don't know if there's a way to split that out. I just want to make sure we're all clear and on the same page there.

Yeah. Hey, Brian. No. So the exposure we're seeing is more on the commercial side, as we said before, and it's more on the lower end of the SMB space. Now, we still are seeing, like I said before, increased scrutiny on larger deals that cut across both commercial and R&D. But as far as the lower spending in SMB, that is more pronounced on the lower end and down the commercial side.

Okay. And maybe just one last clarification. Any help on how Cross-X is priced? Have you guys disclosed that? Just in terms of like the methodology?

We don't really disclose that at a detailed level. We have multiple products in Cross-X that are priced differently. But in general, they will follow the amount of advertising spend the customer does in general. So that's the way you should think about that.

Understood.

Thank you.

Thank you.

There are no further questions in queue. I'd like to turn the call back to CEO Peter Gassner for closing remarks.

All right. Thank you, everyone, for joining the call today. And thank you to our customers for your continued partnership and to the Viva team for your outstanding work in the quarter. Thank you.