Veeva Systems Inc. (VEEV) Earnings Call Transcript & Summary

Thank you, everyone, for joining us on the webcast today for our 2023 Virtual Investor Day. I'm Gunnar Hansen, Head of Investor Relations here at Veeva. Feel free to contact me if you need anything during today's event or if you have any questions in the future. Some quick notes before we begin. We have a series of presentations for the next 60 minutes or so, including comments from a customer. [Operator Instructions] If you have any technical questions, please feel free to submit them through the Q&A widget or e-mail them to [email protected]. Before we get started, I'll read a quick disclaimer. During the course of today's presentations, we will make forward-looking statements, including statements regarding trends, our strategies, market size and opportunities and the anticipated performance of our business, including guidance regarding future financial results. These forward-looking statements are based on management's current views and expectations and are subject to various risks and uncertainties. Actual results may differ materially. Please refer to the risk factors included in our most recent filing on Form 10-Q. Forward-looking statements made during today's presentations are being made as of today, November 9, 2023. If the presentations are replayed or viewed after today, the information presented may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. In the presentation, 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 the appendix of today's presentation, which will be posted on our website. And with that, I'll turn it over to our Founder and CEO, Peter Gassner.

Thanks, Gunnar. Welcome, everyone, and thanks for joining our Investor Day. Our goal today is to provide investors clarity on Veeva, including the current state of the business and future directions. With that in mind, let's get started. Throughout the day, I'll come back to these 4 points. First, we're a very durable company. We have a clear and correct product strategy for a large target market. We also have a proven operating model that enables consistent execution and that gives us a long runway of growth ahead. We'll start with our vision and values. We operate the company by vision and values. I present this slide many times every quarter. Understanding our vision and value is key to understanding the Veeva. First, our vision. We're building the industry cloud for life sciences, that's software, data and professional services to help the industry be more efficient and effective. We want to be essential to and appreciated by every company in life sciences. And our values are how we make decisions. The first one is do the right thing. That's about honesty and integrity about actively knowing what the right thing is and doing it. Customer success has 3 parts: First, for the people in life sciences. They should enjoy working with our people and our products we should deliver for them. Second, the companies in life sciences, our people, our products should deliver return on investment over the long term; and third is for the industry overall. Our products and people should help the industry become more efficient and effective. Employee success that's for our own team. Veeva should be a place where they can do their best work. And speed reminds us to get things done quickly and correctly with high quality in the first time so that we can retain our speed even as we grow. And we are a public benefit corporation, and that's important. Let me spend a minute on that. About 3 years ago, we were the first company to convert to a PBC and that's something we're very proud of. We have a legal duty to balance the interest of customers, employees and shareholders. We also have a PBC purpose. To help the industries we serve, be more productive and to create high-quality jobs. So Veeva is not all about the money. It's about doing the right thing, which is our #1 value. And that's how we can grow a great business and provide value to customers and shareholders. It helps us attract the right talent that shares our values and it helps us deepen customer relationships because customers know our interests are aligned, and we will not take advantage of our leadership position. For shareholders, you're investing in a growing company and you're part of doing the right thing. Before we get into our products, a bit about our industry segments, we are in 2 of those. Those are in life sciences. First, biopharma, that's pharma and biotech, and then medtech. This is medical devices and diagnostics. We also sell into consumer products companies that's things like consumer packaged goods, food and beverages. Life sciences, pharma, biotech, medtech. That's the bulk of our revenue today, over 95%. So that will be our focus today. And our opportunity that's in cloud software, industry-specific data and professional services, including implementation and business consulting. These are all industry-specific all working together for customer success. That's what we mean by industry cloud. Now Life Sciences is a large critical and growing industry that helps improve healthcare around the world. Today, the industry is about $2 trillion in revenue and it's growing about 6% per year. Veeva's opportunity in Life Sciences is about $20 billion. Our TAM is industry-specific software and data. And more than 50% of our TAM is from products we have announced and the remainder is from areas of future opportunity. It also includes high-value professional services. Today, services make up about 20% of our revenue, and we don't expect that to materially increase or decrease over the coming years. We certainly don't want to get into low value or commodity services in any material way. The rationale behind our TAM is very simple, industry-specific software and data is critical to life sciences. It's really the only way to drive long-term efficiency and some level of standardization. Spending 1% on industry-specific technology get more efficient is certainly reasonable. In the future, that percentage will likely grow as the industry becomes more tech-enabled. And I've seen this many times throughout my career. As technology advances, it opens up new opportunities to create more value with new kinds of solutions. And that should be a win-win for Veeva, our customers and the industry. For every dollar of revenue we take in, we want to create at least $2 of value. That's the way to build a durable business that will last for generations. Today, we're about 12% penetrated in our TAM based upon our revenue estimates for this year. So we have a long runway of growth ahead. And these are the areas that make up our life sciences TAM. These are directional numbers rounded to the nearest 5%. As you can see, commercial and clinical are the largest areas. There are a lot of specific technology needs for running clinical trials, and there are many specific technology needs in commercial with sales, medical and marketing. Quality is the next largest area. This is for quality assurance and quality control, mostly in manufacturing. Quality also includes opportunities with service providers like contract manufacturers and other specialized providers. And finally, regulatory and safety. These are essential areas to the industry, but somewhat smaller in opportunity. Now before I provide an update on our products and strategy, I'd like to share some thoughts on the macro environment and our near-term financial forecast. The challenging macro environment continues amid concerns of war in the Middle East, inflation and increasing political uncertainty. Taken together, I would say the macro is starting to trend slightly worse. Higher interest rates in a tough funding environment continue to impact emerging biotechs. The industry is also navigating the IRA policy as related to pricing and product planning. Together, this is causing industry-wide pressure. Since the negative macro environment impacts the industry, of course, that impacts Veeva. In terms of financials, Q3 is coming in about in line to slightly ahead for revenue and operating income. We are taking down full year guidance by about $15 million due to lower-than-expected services revenue in Q4. Services is an easier lever for companies looking for cost reductions, they can use more internal resources or they can delay certain projects. Our guidance for subscription revenue and operating income are in line to slightly above our prior guidance. When it comes to our early guidance for next year, fiscal '25, we are taking down top line revenue of $50 million from at least $2.8 billion to at least $2.75 billion. Again, this is primarily driven by services. We think this is the right approach given the uncertain times. And Brent will provide more details later today. Importantly, we are still on track to meet our $3 billion revenue run rate about 1 year ahead of target. And I want to make a point that our long-term outlook remains very strong. Our industry is very large, growing well over time, and there are many critical areas where they need to drive greater efficiency and effectiveness. Our innovation engine, execution and product excellence are as strong as ever, and the competitive environment remains favorable. All right. Let's talk about our industry cloud for life sciences. That's development cloud, commercial cloud and data cloud. We have a clear product strategy and a commitment to product excellence, picking the right big markets and consistently delivering excellent products in every area is what develops trust and it enables our reference selling model. We spend more on product than most tech companies and less on sales and marketing. And Business Consulting is one of our newest and highest value services to help companies with digital transformation that is enabled by our products. Let's start off with Development Cloud. We started working on this more than 10 years ago at a full vision and we're executing well against a clear plan to transform R&D processes by having unified systems within each area -- all on the same Veeva Vault platform and then connections between areas. It's modular. So customers can adopt as they see fit, they can start in any area. Today, Development Cloud is becoming the standard technology used for drug development, and we still have a lot of room to grow. Today, we are about 10% penetrated in Development Cloud into our TAM. The product areas of development cloud, they are in different levels of maturity from very mature products like eTMF and submissions to very new products like ePRO, Safety, LIMS. We also announced some new applications this year, including batch release and e-forms and quality and workbench and signal in the Safety area. We're very happy with our consistent progress on Development Cloud. This is exactly the playbook we will follow for our expanded commercial cloud on Vault. Now clinical, that's an important and big area within Development Cloud. That represents about 35% of our overall opportunity. It's a big area because it deals with data flow between patients, sites and sponsors. It involves software data and services across clinical operations and data management. It's big, it's highly regulated, and it's the lifeblood of the industry. We are trying to solve the whole problem across sponsors, sites and patients. We are really the first company to attempt this in a serious way. Today, we have more than 10 applications we sell to sponsors, the life sciences companies. And also in this area, clinical research organizations, or CROs, are an important customer as they run many of the systems for smaller biotechs. Our strategy for patients is simplest to provide them one easy application for use in the trial. And for research sites, we will provide free software where we can to help the industry overall get more efficient and become more standardized. We also have a strong vision for Commercial Cloud. Basically, we're going to clean our commercial cloud, put it all in the Vault platform and provide all the major applications. This is just like we're doing in Development Cloud. Moving the Veeva CRM suite to our Vault platform gives us freedom and flexibility. You can see in orange, the major new application areas that we're announcing. Service center, which will be part of CRM suite. This is for case management and workflow that goes between different sales and service teams in a life sciences company. Next is marketing automation. This is an area where we have traditionally partnered with Adobe or Salesforce. We're going to continue to partner, but now we'll also offer our own solution for customers who want a tightly integrated solution and one that's built specifically for life sciences. And finally, patient CRM. This is a U.S.-specific product where customers need to manage highly sensitive workflow around identified patients. For marketing automation and patient CRM, we're just enhancing those directions today, development will start next year, and it's going to take some time for these products to mature. So you can see that our vision for the new Commercial Cloud is compelling, just as compelling as our vision for Development Cloud. Let me spend a minute specifically on Veeva CRM and Vault CRM each have fully dedicated teams inside Veeva with different goals and clear accountability. For Veeva CRM, it's pretty simple. It's instability mode and it's supported until 2030. It's all about keeping Veeva CRM stable and well supportive for customers. The last functional release for Veeva CRM is this December. And after that, we'll continue with maintenance releases. All the new innovation, the focus now is on Vault CRM innovation. As 3 early adopters signed, the first will go live later this month and we're on track for general availability in April. And from that point forward, we will only sell Vault CRM to new customers. We're also making good progress with top 20 pharma, a lot of discussions going on there. We expect to have 2 to 3 top 20s committed to Vault CRM by year-end, and those migration projects for those big customers will start in 2025. Overall, Vault CRM will be a better application than Veeva CRM and the new commercial cloud will be much more complete than today's commercial cloud. Data Cloud is also an exciting area and a newer area for Veeva. We have been very busy with Data Cloud, and we have really progressed our product strategy in the last year. Data Cloud has 4 different types of data. First, reference data with OpenData. As all the important information about doctors and hospitals is used for compliance and for connecting systems. In commercial, we have OpenData for over 80 countries and we're going to create OpenData for clinical, which should be available towards the end of next year. And now deep data with Link. Deep data, you can think of in 2 ways. First, it's data with a cloud application on top, but it's also a cloud application that comes with data in it. A good example might be the Bloomberg terminal. I think that's a great example of deep data. It's complex data and software together and that's what Link is deep data. In Link we put together thousands of data sources, most of which are publicly available. We assemble that through automation and manual curation. And then we write very specific software applications on top of that data. Our most mature application in Link is Key People. that's deep profiles about the most important thought leaders for the industry. It covers about 3 million people in depth. For comparison, OpenData covers over 20 million people for reference data, but not in as much depth. We're really excited about Link and we're going to expand that to clinical as well. Deep data is an area where Veeva is leading the market. And then transaction data with Compass, that's specific to the U.S. market and includes Patient, Prescriber and National products. Patient is anonymous patient data that covers prescriptions and procedures at the patient level. Prescriber is projected prescription and procedure data at the HCP or doctor level, Zip and state levels. And National is for national level projections. Basically, with Compass, we are delivering a modern alternative to IQVIA for commercial transaction data. Patient is available today, Prescriber and National will be available in January. And finally, Pulse data. This is unique to Veeva. This is data that we generate from our Veeva applications from the usage of our applications. It provides a view into what the industry is doing in aggregate across certain metrics. This is really important for the industry as individual companies look to areas where they can improve. They can have standardized information about their own activities and compare that to the industry overall. This is how the whole industry can get better. Today, we have used Pulse as part of our business consulting offerings in commercial and it was really important to incubate Pulse in that way over the past 2 years. Going forward in 2025, we will make Pulse a full data subscription. We will also expand Pulse to clinical at some point. It's important to understand that all this data is built on a common data architecture. Indeed, that is the equivalent of the Vault platform. It provides consistency across the data products. This is where we use common definitions for things like specialties, product areas and disease areas. And that's a big deal. That's a way to connect data across areas and across commercial and clinical. Just like Development Cloud and Commercial Cloud, Data Cloud is a compelling vision and that you won't see that from any other company. Now we have to execute, and that's going to take many years. At a high level, what are we doing? We Veeva are bringing together software and data. First, we're connecting the software together, then connecting the data together and then connecting the software with the data. That's what the industry cloud is all about. That's why we're really excited about the value we can create. Now bigger picture on technology trends in AI. I've seen a lot of technology trends over my time from client server to web browsers, web search, social media, cloud computing, and now AI. Some of these trends succeed and become commodity and easy to adopt. And some other trends, they fade out over time. You don't hear about them anymore. They never really make it. It's clear that AI will be a lasting trend. So I wanted to make a few points on that. Our AI approach is very focused and practical. First, we're making the data in our applications highly available to all kinds of AI applications. Early next year, we will release a new API called the Direct Data API for the Vault platform. It's a totally new type of API that lets customers get their data out of Vault at very high speed, about 100x faster than they can do it today. And that will be very important over the years for all kinds of application uses, but specifically and especially for AI. And second, we will develop application bots over time. Some of these will be charged as separate applications and some will be included in existing applications. We already have the first one called TMF bot live with many customers. It comes with our eTMF applications. In the future, as the basic AI components mature, Veeva is in a very good position for industry-specific AI. We know the industry and how it operates and we're building some of the very core data assets that AI applications will need. For now, our AI strategy is focused and practical, and we'll see how things evolve over time. So we have big product plans, and we're very excited about that, but it really comes down to execution. That's what makes a great company. And that's what Veeva is great at, execution. And the way we execute has not changed. We call that the Veeva Way. First, we identified clear and correct markets. We form great product teams and over time, we create excellent products. We get early customers live and happy. We focus on their success and that starts the reference selling. That's the way we do it. It really hasn't changed much from the start of Veeva and we have a lot of work to do because many of our products are early in maturity and market share. Some like CRM, commercial content and regulatory are quite mature. And in some areas like Compass and Safety, we are so early. Our job over the years is to move all of these product areas up and to the rider so they are mature and market-leading products. That's the way we add value to customers and shareholders. We have a good track record of executing over the long term. In 2015, we announced our $1 billion revenue goal, and we met that about 1 year ahead of time. In 2019, we announced our $3 billion revenue goal, and we're tracking about 1 year ahead of plan. And we've set our product strategy to keep growing through 2030 and beyond. All right. I'll finish in the same way I started. I hope you have seen that Veeva is a very durable company. We have a clear and correct product strategy or a large target market. We also have a proven operating model that enables consistent execution, and that gives us a long runway of growth ahead. With that, I'll turn it over to Brent to give more information on our financials.

Thank you, Peter. Before we start, I'll provide a brief update on our preliminary Q3 '24 results and our forward guidance given we just completed the third quarter. Our preliminary Q3 results for total revenue and operating income are tracking in line to slightly above our prior guidance. Overall, we continue to see a challenging macro environment. This is having a disproportionate impact on our services business, which, as you know, can vary depending on customer-specific requirements and is less predictable than our subscription business. Customers are increasingly scrutinizing spend. This is negatively impacting our services outlook relative to our prior expectations. As a result, we are reducing our Q4 total revenue guidance by $15 million to $621 million to $623 million. Importantly, our subscription revenue and operating income guidance is unchanged compared to our prior implied guidance. Our fiscal '24 guidance now reflects total revenue of $2.355 billion at the high end. A decrease of $15 million and operating income of $827 million, an increase of $7 million compared to our prior guidance. As we look ahead into fiscal '25, we assume the macro headwinds will continue, particularly those impacting our services business. As a result, we are updating our fiscal '25 revenue guidance to be at least $2.75 billion. This updated guidance also reflects about $10 million incremental FX headwind compared to our prior guidance. It is important to note that our subscription revenue outlook is essentially unchanged relative to our prior expectations, and we remain confident in achieving operating income of at least $1 billion. For fiscal '24, we will provide further details on our Q3 '24 earnings call, and we'll provide our full guidance for fiscal '25 on our Q4 '24 earnings call. As you can see, we have a consistent history of strong revenue growth and increasing operating income as the most strategic partner to the life science industry. Looking at fiscal '24, we now expect termination for convenience standardization to be about a $90 million headwind to total revenue and operating income. This slight adjustment relative to our prior expectations is due to the timing of certain opportunities. Recall, termination for convenience standardization is not expected to impact the total contract value, but it does impact the timing of revenue recognition. Normalizing for termination for convenience and FX, our updated guidance reflects about 14% total revenue growth in fiscal '24. Our fiscal '25 updated guidance for at least $2.75 billion of total revenue reflects growth normalized for termination for convenience and FX of about 13%. As we stated earlier, this reflects a subscription revenue outlook that is essentially in line with our prior expectations, offset by a weaker services growth outlook. I'm pleased to say that we continue to track about 1 year ahead of our 2025 targets, which calls for a revenue run rate of $3 billion and operating margin above 35%. We also continue to track ahead in both commercial and R&D with commercial tracking a bit further ahead relative to the revenue split we originally expected. As a multiproduct company, I am encouraged by her disciplined execution and excited about the many growth drivers ahead. Our competitive positioning and customer relationships are as strong as ever. This result of our clear -- and consistent operating model. Veeva's proven operating model is foundational to our consistent execution, resulting in strong growth and profitability. It starts with identifying clear and correct target markets. We only enter new markets and build new products where there's a big and strategic problem to solve, and we think we can become the market leader over time. Next, we focus on discipline and accurate hiring in the product and go-to-market teams, great people with a focus on lean teams. We find early adopters and drive the product excellence through close partnership with those customers. Once we have established customer success for our early adopters, we move into the reference selling model. The reference selling model at Veeva is a well-oiled machine. It's highly efficient and helps drive adoption and industry efficiency. The operating model started in Veeva's early days and continues to be as effective as ever across our commercial, R&D and data businesses. We have a clear operating model, and we stick to it. It has proven to be successful over time, and we expect that to continue. The past year, we introduced the company's first subscription fee inflation adjustment at a rate of 4%. This 4% adjustment is currently effective for orders renewing from April 1 of 2023 through March 31 of 2024. This annual increase is established based upon the lesser of CPI or 4%. We think this is a reasonable and balanced approach to managing the inflationary environment. It is also predictable for our customers. As you can see for the 12-month period starting April 1, 2024, the inflation adjustment will be 3.7% for all renewal business. As a reminder, it will take a few years to roll out across our customer base due to the timing of customer renewals and contract terms. As Peter mentioned, our TAM now reflects a top-down industry approach. This represents a longer-term customer-centric view of our market opportunity. As a strategic partner to life science industry, we believe the value we deliver through our software, data and high-value services could be worth at least 1% of the industry. This results in a $20 billion-plus market opportunity, of which more than half is addressable from announced products. At a high level, commercial and clinical are our largest opportunities, each representing about 35% of the total addressable market. Based on our estimated fiscal '24 revenue, we're about 12% penetrated, which provides for a long runway of growth ahead. Let's now take a look at how our products are contributing to revenue today. As I look at our revenue mix today, about 60% of our subscription revenue comes from only 5 products. These are core CRM, PromoMats, eTMF, QualityDocs and regulatory submissions. These are our most established products, having all been in the market for at least 10 years, and there is still opportunity for growth in each of these products. The rest of our broad and growing product portfolio accounts for the remaining 40%. These products are much earlier in their maturity and include some of our largest product opportunities such as EDC, Safety, Link and Compass, among others. We have become a true and growing multiproduct company as a result of our commitment to innovation, product excellence and customer success. This gives us confidence we can continue to deliver durable growth through 2030 and beyond. Taking a step back, I want to share some details regarding the industries we serve. We have 3 main industry segments today. Biopharma, medtech and consumer products. Biopharma is where we started and represents 94% of our current revenue. We have over 1,000 customers today, including large global pharma companies as well as preclinical biotechs. Medtech and consumer represent smaller portions of our revenue, but each amounts to a significant opportunity as we look forward. Within biopharma, 2/3 of our revenue comes from enterprise customers, you can generally think of these as our top 50 customers. SMBs represent our second largest cohort, contributing 25% of our revenue across about 700 customers. This includes companies with multiple billions of dollars in revenue all the way to specialized biotechs commercializing for the first time. Our SMB segment excludes our emerging biotech customers, which represent 4% of our total biopharma revenue across about 300 customers. We define emerging biotechs as companies with less than 1,000 employees and no approved commercial product. And contract research organizations, or CROs, represent 5% of our revenue. Veeva's durable operating model generates strong operating income and margin, which continues to support future growth investments. Recall prior year margins benefited from reduced COVID-related travel and event spend. For fiscal '24, we believe travel and event spend is now at a new normal. Our operating income generates strong cash flows, which enables us to invest in our people and products and supports our M&A strategy. In summary, I am encouraged by the progress Veeva's made this year, and I'm excited about the opportunity ahead. Our consistent execution is delivering strong financial results, which has us tracking about a year ahead of our 2025 targets. We have a proven operating model that supports our vision to build the industry cloud for life sciences through software, data and high-value services. As a multiproduct company, we see a significant growth opportunity ahead. We are still early days in many of our largest product opportunities. Our focus on customer success and product excellence has strengthened our position as a strategic partner to the industry, which is critical in driving our strong growth and profitability. With that, we are scheduled for a 10-minute break before we turn to Paul to get a customer's perspective. [Break]

All right. Welcome back, everyone. I get to lead this year's customer fireside chat, and I'm very pleased to have with us Nicole Rosenberger. Nicole is the VP and Head of IT at Madrigal Pharmaceuticals. She spent the last 30 years in information technology and she has a very long track record of driving technology strategy and execution, for R&D, for launch, for commercialization. Nicole has been part of large pharma companies, small pharma companies. She's seen it all. And now she has a very exciting opportunity ahead of her. And that's what we're here to talk a little bit about. But first, welcome to call. Thank you so much for joining us.

Thank you, Paul. It's great to be here.

All right. Well, let's jump in and into that exciting opportunity that we have. For those of you that may not know Madrigal. Madrigal is a development-stage biopharmaceutical company who's focused on delivering the first foundational therapy for the treatment of patients with NASH. NASH is a very serious liver disease. Nicole, with that backdrop, maybe you can give us a little bit more context on the opportunity, but also where you are as a company.

Yes, certainly. So NASH is a form of hepatitis and is projected to be the leading cause of liver transplantation in the U.S. Right now, there's no approved treatment for NASH. So it is a significant unmet medical need. Madrigal's [indiscernible] treatment for NASH is the furthest salon in development, and we are currently under review with the FDA for a potential approval in early 2024. It will be the first medication approval in NASH, which is a huge event for our patient community. And it would also mark our company's transition from being a development-stage organization to really a fully integrated commercial stage biopharma. So as you can imagine, we are growing our commercial team rapidly in preparation for launch, and we expect to hire a field-based sales force as our launch approaches for early next year. So our engagement with Veeva really comes at a transformational time for Madrigal.

Thanks, Nicole. Thanks for painting the picture, and we're proud to be a very small part of your very important journey. We're rooting for you every step along the way. Now let's start with the experience that you had. You had a lot of experience coming into this role. I highlighted some of that. You've been around the industry for a very long time. How did you think about your technology strategy to enable Madrigal. You have really big goals ahead of you? How do you think about information technology as an enabler?

No, we do. So I joined Madrigal about 2 years ago as their first internal IT person. In my mission, along with many others, is to make sure that we're really ready for commercialization and for large company growth. So maturing our enterprise technology to be ready for that so we can grow exponentially. Right now, we're about 150 people, and we expect to be at nearly 400 at the end of the first quarter so rapid, rapid growth. Coming in though, we have the opportunity to really look at creating a clean, efficient architecture. And my focus in this was to use modern technology in common platforms wherever possible and have a technology stack that allows systems to work seamlessly together without a lot of lift in integration. But still enabling our business strategy with that. One example, and I think about this with Veeva on how we were able to do that, is we've implemented several different Vault solutions across the enterprise, enabling everything from learning and storing SAPs all the way to promotional review.

So you -- the division that you have is clear, you're executing across a number of different areas, but you have the reality of most small and emerging growth companies like yourself, which is a very lean team, you have to do a lot, you have to move with speed. What are the most important parts of your execution plan?

So yes, our internal team is very lean. Lean is definitely a word for it. So with that, we do rely very heavily on partners, and I use partners as an extension of my team. The strategy and my strategy is to have internal people know our business, work on our business strategy, help make technology decisions. And then with that, we focus on a small number of strategic partners to really help us with some of our most important priorities, including technology, but also advice on how we can operate as we're going through in preparation. So for me, I really appreciate partners that can bring in a lot of expertise and insights as they're working with us. But it's also important to pick the right partners. It can be a big distraction, not only for us but for the company and really take us away from the important work that we're trying to do to get ready for a commercial launch. So what I'm looking for partners, I'm looking for great products and services that work well in our environment, in our technology stack, but also really work well with our people, not just our IT people, but our business people as well. And have the right focus on our success and not just that transaction of that sale. So our best partners bring ideas and expertise with that. And the big thing, and I talk about this all the time, is really working with people who are honest and transparent and really think about what's best for our business and not just for their bottom line.

Yes, thanks. And you've been working with us for a long time. You've known us across many different companies. And you've brought us in. I guess we had a little bit of a footprint at Madrigal before you joined, but you've really expanded the vision. How does Veeva fit into your overall partnership strategy? How do you think about that?

Yes. Well, as you mentioned, I have worked with Veeva for a very, very long time in some of my previous companies prior to coming here. Coming into a pre-commercial company, it really gave me the chance to think about some of our core systems from the ground up, which to me is very exciting. And Veeva's really become a strategic partner on many different levels. As I mentioned, Vault gives us leverage across our business. And it's not just a commercial product. We have it across R&D as well. When we started, we had regulatory, as you mentioned, and then we implemented MedComms, PromoMats. We have made the decision to leverage Veeva CRM for our field-based teams. So we went live with medical affairs and market access at the end of August. We kicked off our sales implementation about 1.5 weeks ago. So we are marching ahead with that. We've also put in a clean data foundation with OpenData. So expanding with the new applications and having this data internally really creates more value, but they also really work well together. So the second part of your question is looking for products and vendors that know us as a biotech. We are way too small in my team, as I mentioned before, is entirely too lean to teach people about what we do or to go through large implementation time lines and really customize solutions. So we're looking for products and services that fit our needs, and Veeva does that. We don't have to go through a large development effort to get them live because the products are pretty much ready for us. So an example, and I use this a lot is we implemented PromoMats in 6 weeks. Very fast, very efficient and it works well for us. We've made very few changes since then. Our medical affairs CRM implementation, we did in 8 weeks. So it enables my team as well to really focus on the short implementation time lines. Because we are rapidly growing and evolving. But we also -- in doing that, know the technology and the integration is solid for us, which is equally important.

You spoke about a lot there, are things like execution and excellent product and services, domain -- partners bringing domain expertise in. At some level, it sounds basic, we know how hard it is to do, I think you know and appreciate how hard it is to do. Maybe your thoughts on why is it so hard to do a lot of these things, which sound like just core blocking and tackling. So I guess that's one. And then as you think about looking across the partners, what is it that distinguishes those partners who can execute well from those that maybe cannot execute as well?

Sure. I mean, as you said, it really isn't easy. It sounds that it's not at all. A lot of companies have great stories and sale pitches. I can tell you, I hear them almost every day, but not all can really execute with consistency. And for me, in my role, my job is to pick the right partners, the right technology, the right people that are going to work with us. And a lot of, once again, what I use is who can I really trust and rely on as we're going through this journey. And to me, trust is a couple of different things. The first is who's going to have a great product and who's going to deliver it. Having the right vendors with the right focus and the right vision. And that isn't the easiest thing to find. And the second is back to that trust and that caring. So every project hits a bump, and they always do. And to me, what really defines vendors is what happens when you hit those bumps, like how do we fix the course? A lot of vendors make promises, but they just don't have the focus, persistence and a lot of times, the people they promise to make that work. And while Veeva has certainly gotten a lot bigger than when I first started working with you all, I feel like that partnership has really remained the same. And there's really consistent execution across my previous companies. I feel like we're doing that here now. And the team really stays involved and understands and keeps track of our business. My salesperson stays throughout my entire implementation time line. And I talk to them at least once a week. They're involved, they care, they really think longer term. And I just feel like Veeva is an extended part of my team in that we, as a company, really matter. And that's the difference.

Nicole, you're talking about a lot of things that are so core to our values and how we operate. It's nice to hear them being played back by a customer. I'm going to transition to CRM. You alluded to already, you made the decision to use Veeva CRM for all your field teams, you made that decision before we announced Vault CRM and you're continuing. And what are your thoughts on Vault CRM and ultimately on the transitioning when the timing is right?

Sure. And yes, we did decide before Vault was an option. And we, over the summer, did implement Veeva CRM for our medical affairs team and market access. We kicked off our sales implementation about 1.5 weeks ago, in anticipation of our launch for the first part of next year. So waiting for Vault CRM was not an option for us. But I do feel that going for Vault makes sense. We use Vault in many parts of our business already across R&D and commercial. And it really supports specific processes that we have as a biotech. And as I had said earlier, without a ton of customization and development. So adding more applications on the same platform, I think will give us even greater leverage because it's consistent technology and it all works together. So we will launch Veeva CRM, and we will plan to move to Vault CRM over time. I'm not concerned about the migration at all. If anything, I'm more encouraged by some of the continued innovation that you announced today about marketing in patient CRM. And to me, the potential of working with Veeva just continues to expand.

Thanks, Nicole. Yes, some exciting announcements that we just had. You referenced how we're expanding commercial cloud. We're going to include marketing, we're going to include patient CRM. I guess maybe 1 final question for you as you think about Vault CRM, maybe what are -- what is it that you're most excited about? What's the biggest opportunity that you see?

Well, I think overall, just the breadth of the products continues to expand. And it harmonizes the technology and the processes across the company, which is just so important because many times, they've said, how do we bring the R&D and commercial focus together. And I think this does that. And that's what I'm excited about is bringing the areas together. Veeva is in a position to help us do that. An example I use is medical affairs is really important with building our markets and having the right scientific insights and relationships and connecting them appropriately with clinical and commercial is a huge opportunity and can be very powerful. For example, there could be an opportunity for medical affairs to be able to help recruit for ongoing clinical trials. And then expanding even farther from that when you're talking about service and marketing and patient, I just see -- and that continuing to evolve. And I do continuously challenge our partners to think about all the different areas and not just one business segment. And to me, what's exciting about this is that Veeva is doing that.

So I am not surprised at all that, that was your answer. Nicole, you've been talking to us about bringing R&D and commercial together for a very long time for a number of years. So you're in a sense are leading in that area, and you're also pushing us. So thanks for the continued collaboration and the partnership we've had over many years. Thanks for joining us today. Pleasure to have you.

Thank you. It was a pleasure to be here.

And with that, Peter, we'll turn it back over to you for final comments.

All right. Thanks, Paul and Nicole, and thanks to the whole Madrigal team. You're doing amazing things. And we're so happy to be part of it. So thanks, again, Nicole, for joining. All right, I guess we turn it over to Gunnar to field the questions.

That's right. And thanks again, everyone, for participating in the virtual Investor Day. [Operator Instructions] So kicking us off will be Brian Peterson with Raymond James.

So Brent, I just wanted to start on the update to the guidance and obviously, with the services trends. Is there anything that you can hit on from a linearity perspective and what we saw in services. And I think we're getting some how much is related to kind of the implementations for customers versus maybe what you're consulting, any help on sizing that mix?

Yes. Good to see you, Brian. Yes, so we started to see this in about mid-Q3. So the macro impact that we discussed is having a bit more of a pronounced impact on our services business specifically in the post-implementation services. So those are the services that's an easier lever to pull if you're looking forward to some efficiency gains. So that was a big piece of the services bring down. Also in the implementation services, we're looking at customers take a more economical approach to implementation services. Are they using a little bit more of their own internal headcount? Are they skinning down scopes of work? So that's what we are seeing. And given that, we thought it was prudent to update the Q4 guidance, which we did, the $15 million reduction was due to services. And then we have assumed that, that view continues into fiscal year '25 and that informed our guidance as well for '25.

Great. And maybe just a quick follow-up. As we think about the new products you guys announced today, obviously, the $20 billion TAM, are you guys able to talk through maybe what the incremental TAM is from what you guys announced today?

Yes. I can take that one, Brian. I didn't quite catch it there. You asked about the incremental TAM, but I didn't quite catch your full question.

So yes, I was just focusing, obviously the TAM now at $20 billion. It feels like it's a little bit of a different approach. So I guess if we were to look at what was announced today, how do we think about that incremental TAM that you guys can address versus what's coming in the future?

I think the best way to think about it is, if you look at that TAM, about 50% -- over 50% is covered by the products that we have announced today that we have today, not even those new products. So about 50% would be not including patient services, not including Link Clinical, all that type of stuff. We won't break it down further than that. I think the best way to think about it is by these functional areas, commercial, clinical, quality, regulatory and safety.

And your next question will be from Saket Kalia with Barclays.

Okay. Great. Gunnar. Can you hear me? Can you see me?

Yes, we can.

Excellent, okay. Great. And appreciate you hosting this event. Maybe this is a question for both Peter and Paul. Great to see some early top 20 pharma companies thinking about Vault CRM. Clearly, this is a big shift for both Veeva and for the customers. I guess as you all have more specific conversations with customers on Vault CRM, how are you thinking about potentially entertaining other CRM options out there, whether it's IQVIA or maybe at some point, Salesforce, how are they thinking about that? And how are you may be getting them comfortable with what may be a heavy lift in terms of migration? Sorry, there's a lot there. Does that make sense?

It does, Saket. Let me try to take all those compound questions. So first, we're super excited about the couple of enterprise companies that Peter had talked about that are committing to Vault CRM. We set out to have a couple of customers as go as early adopters. So we're thinking about it as early adopter customer list. We're checked off there. So that's a big milestone for us. I got a little bit more work to do, but that's super exciting. That's going to help us set us up to scale after we get these first early customers going. So that's super exciting. The way I think about the strategy, just in terms of getting customers comfortable, the migration, all of that. I guess I'd say it's kind of 3 big things. One is we're going to deliver a better CRM, Two is we're going to make it easy to get to that CRM. And then Three is we're going to deliver an expanded commercial cloud, a new, more complete commercial cloud. Those are kind of the 3 buckets. Let me take each one of them. Better CRM, we have complete control. We have the flexibility to do what we need. Just moving to the Vault platform. That will help us with kind of world-class content management built right into the CRM as one example. That becomes more important as the industry is becoming more digital, they need more content, they need to execute on that faster. That's just a built-in capability. That's one of many examples. In terms of making it as easy as possible to get there, the good news is most of our existing customers, and they've done a lot of the work, just by the fact that they're on Veeva CRM and they've built everything that they've built. They're going to get the full functionality of everything they've done on day 1 when they migrate. So we're going to -- and we're building tooling to make that move as easy as possible. We'll move their configuration, their data, their users, we'll preserve the full investment of their content. So our whole strategy is built around making it easy for them to get there, taking advantage of everything that they've already done. Now having said that, there'll certainly be work to do. But if you compare that to any other alternative, it doesn't matter what it is, this can be 80% less work, effort, cost than any other option. So better CRM, a very clear strategy to get them there as easy as possible. And then the third is, I would call out the commercial cloud. It's the full -- this is much bigger than a CRM. What we're talking about here is software, data, services, all working together. Think about what we've done so far in Commercial Cloud, we've connected CRM to our commercial content system, that's really important for getting digital content out to the field very quickly and efficiently. We've connected it with Crossix. We've synchronized sales and marketing. We've connected it with our data cloud, our data applications, our deep data, Link and Compass and Pulse going forward. So this is just something that's very, very different. And then we're expanding that vision. You heard Peter announce areas like going into marketing and going in the patient. Patient becomes more important as the industry evolves more towards these complex specialized medicines. So this is a big vision. This is way bigger than what we're doing in CRM. Yes, they're going to get a better CRM. Yes, we're going to make it a whole lot easier to get there but this is a real big vision. So we're super excited about the clear product strategy is on us to continue to execute.

Our next question will be from Ryan MacDonald of Needham.

Peter, I'm kind of curious so given the macro environment and sort of the tightening of budgets right now and you're seeing that on the services side, I guess, and how -- as you have more conversations with these customers that are sort of tightening their belts, how much of this is being viewed as maybe sort of the first step along sort of -- more of a cost-cutting measures. And I'm really asking as we look into next year and into 2025, what sort of risks are you seeing potentially to this having an impact on the subscription revenues over time upon renewals if this is going to be sort of an extended impact from the inflation reduction or some of the other macro factors. And we've seen a lot of pressure in life sciences earlier this year. Why are you only maybe starting to see it now versus maybe earlier in the year?

Yes. So yes, the macro -- macro is -- I think it's trended a little worse. I call it slightly worse. We had some events in the world that has happened recently. So -- and we have -- for example, I'll give you just an anecdote. Sometimes the anecdote help. So one large customer we're working with, instead of a 2-week shutdown over the holidays, they're going to do that, but a 1-week shutdown for an extra 1-week for any external vendors as a way to it. So that -- it's more -- to me, it feels like short-term adjustments, and that's what you do in services. Now when you have capabilities, that's our subscriptions, those turn into capabilities, capabilities to manufacture efficiently, capabilities to register products, et cetera. Those have a longer cycle and companies really -- they won't make short term, they won't allow generally short-term things to affect that because they know they have a -- you put one of these Veeva Systems in there, especially the big company. It's in there for 15 years. And if you delay too long, you could have serious -- real serious problems. So actually, we had active discussions in Q4. We actually got a -- it's a verbal -- an emotional commitment, sometimes at Veeva we call emotional commitment, had a big customer emotional commitment is actually when you know you've won, right? Yes, it could -- paperwork is not signed yet, but we had an emotional commitment in Q4 for one of our largest projects ever. But that thing is -- that's actually in the regulatory area. That's going to play out over the long term, right? So I don't see it moving over into the subscription business because of that difference.

It's great to see the stickiness and the strategic nature of the business and the...

Yes, there's actually -- there's 1 more thing that can help, too. In these times, what -- also what doesn't get done is speculative try it out projects. And that actually helps Veeva when -- if customers lean in the boom times, they lean too much, a little bit into speculative, try it out. We're a core capabilities company. So we're definitely not competing with speculative projects anymore.

[Operator Instructions] Our next question will come from Rishi Jaluria from RBC.

Wonderful. Just 2 for me. First, Peter, and maybe for Paul as well, I want to dive a little bit deeper into your strategy around generative AI. I know you've been using AI for a while. It feels like there is a really big opportunity for you as a leader in pharma and biopharma to maybe verticalize a lot of these LLMs and add a lot more value there for your customer base that they won't be able to do on their own. Can you maybe speak to the opportunities there? I know, Peter, you talked about some early opportunities. But thinking out through 2030 because you're kind of laying out that foundation, how should we be thinking about your opportunity there and maybe the monetization that could come with that? And then I've got a quick follow-up.

Yes. Thanks, Rishi. About generative AI, you're right. We are in a good position, right? We know deeply about the industry, about the data, about the business processes, about the security, the compliance, et cetera. And a lot of that data is in the Veeva system. So I think we will -- what you call specialized those LLMs over time, and we'll make applications. Some of them will be small, but be add-ons to our existing applications like CTMs or pretty eTMF. Some of them might be ones that we're going to charge for separately, either by the user or in some other way. We just don't know yet. So our approach is -- but we're not -- also I'm not worried about it, right, in terms of industry-specific AI. I think Veeva is in a very good position also with the data we're producing, like with Compass and Link, that's data that's going to be needed, critically needed in any kind of AI engine and that's our core IP that's not available to others unless we license it. So I think we have a lot of good opportunity, but we're really, really focused and practical, not a lot to hide in Veeva. My remarks are about tech trends, right? They either become easy in commodity and everybody does it or they fall or they just fall by the wayside. So there's really no rush for me to AI. We'll do it right, and we'll do it over time.

All right. Wonderful. That's really helpful. And then going back to the migrations from Veeva CRM to Vault CRM. One piece of feedback we've heard from talking to customers, right, is that it is a significant undertaking, both of time and money. You talked a little bit about that, but maybe can you talk about are there any tools in your arsenal that you can use to make that a little bit of an easier pill to swallow for customers, be that discounting or even bundling in other commercial solutions just to provide that incentive.

Yes, I'll take that. And there's there are certainly tools, migration tools, right? In our product development team for Vault CRM, we have the core product development team. We also have the migration tools development team. So we're -- that's not actually in our professional services team. I have the migration tools development team. So we're treating it as a factory process. We got X number of customers to move, let's make it -- let's do as much of that move with technology as we can. And in terms of incentives for customers, I think the incentive is mostly the value in the new application. Yes, when we work with early adopters, sure, we're going to help them out with some services, maybe discount for very early adopters, we'll put extra effort on it. But no, going to Vault CRM is by far the least expensive option for customers. The Veeva CRM as it is now, they can stay on that till 2030, but at some point, staying on that is not an option. So I can go to Veeva CRM. That might cost me all in $5, whatever, I go to a competitor that might cost me $20. All right. I better go to Veeva and it's -- we're also -- I think customers look at it this way. First of all, there's a known in Veeva, and then there's an unknown in what a competitor might do, right, because they don't have a product yet. Some customers want to just make that decision early top down for their organization, don't spend a lot of time evaluating things. We're going with Veeva, align all your plans around that, et cetera. Some customers say, it's not a decision we have to make yet. We're on Veeva CRM. We got other priorities, whatever. Okay. Let's think about it later. And some companies they are interested in comparing and contrasting, but I think some of them are getting a little frustrated because they have a known in Veeva and an unknown in the competitors. So that's kind of how it's playing out. So discounting now that's -- that's not what we would do. That's not needed to get people there.

Our next question is from DJ Hynes of Canaccord.

And maybe one on marketing automation. So you talked about in the past, partnering with Salesforce and Adobe. I think of kind of marketing automation infrastructure as being generally horizontal, right? When you talk about building a verticalized effort in that space that, I guess, displaced some of those relationships? Like what does that entail? How does the product differentiate that positions you to win?

Paul, do you want to take that one?

Yes. You're right. We've had -- we partnered with Salesforce and Adobe. We'll continue to have customers who choose to use them. We're going to create something that's much more integrated into the commercial cloud. It will be tightly integrated into CRM. That's a big thing, right, because a lot of our -- a lot of the solutions that exist today, they're stand-alone. They don't connect in. And they're actually over-architected for what the life sciences industry needs. So we're going to build more precisely what life sciences needs. I'll give you an example of something that we do in core CRM. In core CRM, you have field teams that use content to talk to doctors, and it's important that, that content is very specific to, let's say, the specialty of that doctor. That's a regulation. You can't show content that's approved for an oncology medicine to, let's say, a general practitioner or pediatrician. That's something that's built into the application. We would build that kind of thing into the marketing automation system to make sure those rules are respected. That will just be a standard part of the product. It's one example. But -- so we'll focus it. We'll make it life sciences specific and it will be tightly integrated and it will give our customers choice. And the idea here is we want to build out a full and more complete commercial cloud and marketing is a key part of that.

Yes. Okay. And Brent, maybe a follow-up for you, which I think Ryan's question was trying to get at. You talk about the macro getting worse on the margin, and we look at the guide normalizing for TFC and [ currency ], 14% this year, 13% next year. Like what gives you the comfort that only a one point deceleration is kind of enough of a cushion to be guiding out 5 quarters from now?

Yes. And Peter mentioned a good example of this just a minute ago is we have an emotional win, a very significant emotional win in the regulatory space, and I could take that more broadly as we look at the pipe and look at the opportunity. We are progressing a lot of significant deals. And so our competitive positioning is as strong as ever. We're winning the business. The macro continues as it has been. The subscription business remains consistent as expected. So I would say it's our visibility. The services piece is more variable as we said. And it is on -- more on the -- more discretionary items like the post-implementation, smaller consulting projects, the $100,000, $200,000 projects that might have flown through more easily are not as easy. So that gives us confidence.

Our next question is from Ken Wong with Oppenheimer.

I wanted to maybe circle back on the marketing automation question. I think historically, when you guys launch products, you guys have maybe some that are more modules, kind of one-off point solutions. And then you've got others that feel a little more transformative, a little more platform-like with Data Cloud, obviously, Vault in the past. How do you guys think about marketing automation and arguably is as large of a TAM as CRM, are you guys seeing this as more additive to CRM or potentially as its own stand-alone product?

I guess I could take that one, Paul. Yes. I would say it's definitely not an add-on like Events Management or a line. This is a significant application. Is it as big as CRM overall? I don't really think so, but it's not maybe that far off. And the reality is we have to get in there. So we have to get in there with the core of the marketing automation. In that area, are there going to be add-on products, I'm sure there are. Is there some special thing we can make between our marketing automation, for example, Crossix? Well, there might be, right? Because Crossix also measures media spend. Well, that's related to your campaigns that are driving the media spend. So I would say it's too early to know for sure. Our approach is going to be start building the product next year, get some early adopter customers. Usually, those will be small customers, very nimble customers and we grow from there. But you shouldn't view it as an add on. It will be a significant product. I expect it to add at least to a pharmaceutical company, I expect it to add at least 3x the value that the generic solutions are providing today. and I want to share some of that with the life sciences company, right? We always want to do that, right? We've taken $1 of revenue, we want to be creating at least $2 of value. This product has got to be fundamentally better, and we've proven we know how to do that.

Perfect. And then Brian, just in terms of the macro impact and if we get it a little discretionary on the services side. I guess as we think about on the subscription side, anything you're seeing, hearing from customers in terms of maybe kind of on deal duration or slippage or sales cycles, anything that you can share as far as kind of what you're hearing and seeing out there in the demand environment?

Yes, Ken. So I would say it's a continuation of what we've seen over the past year. So we have continued to see longer cycle times, elongation of deals. We're winning the deals. That hasn't changed. But I wouldn't say that we've seen anything materially different than what we had seen -- saw on that deal. Services was a little bit more acute, that's what we called out.

I guess maybe the root of my question was -- would just be -- for the last couple of quarters, we've seen billings outpace revenue. I think some of that is timing, maybe some of that is just this deal duration. I guess anything from a second half perspective that we should be kind of thinking through as far as how that might impact billings relative to what you messaged on revenues?

To your point, in the first half of the year, we outperformed a bit in billings, and I did call out time. It was like, I call them 50-50 vaults. Sometimes the timing is in your favor and sometimes it's not, but the deals are getting done. I'll provide updated billings guidance here. Our earnings call is going to be on December 6 so that's upcoming. So I'll give a detailed guidance around that. But what you should think about is the correlation of services revenue to billings, that is a pretty direct correlation. So I would say, consider that point. as well as the impact of FX is more real time on billings than it is on revenue. So a couple of data points there, but in the month, we'll talk to it in detail.

Our next question is from Jack Wallace with Guggenheim.

All right. Guys, can you hear me?

Yes.

Just to have a follow-up with Ken's question there. And maybe I'd ask it differently, I noticed there was a change in the TFC headwind in the fourth quarter and as we know with billings, if you have it in 1 quarter, it's a smaller drag for TFC, the next and it builds and builds. So with the smaller drag in the fourth quarter, is that a signal that there was a pull forward of deals or maybe any change in duration annual biller versus monthly?

Yes. So when we started the year, we projected that the termination for convenience impact was going to be about $95 million. So that was our best estimate. You fast forward to today, we believe that the best estimate of that is $90 million. So that's a $5 million reduction. And that's purely timing of deals and when those deals are closing. It's actually not a pull forward. It is a little bit of it could be a movement from 1 month to another within a quarter or it could be a little bit of movement from 1 quarter forward. So we see a little bit of that, and that's what's impacting that TFC adjustment. . And again, those -- we still have the same line of sight to those deals. The timing was just a little bit different than what we thought going back 7, 9 months ago.

Got you. That's helpful. And then Salesforce has made some recent announcements that you would appear to be encroaching more into your business than just a CRM competitive product. if I'm thinking about the increased TAM you detailed earlier, are there any products contemplated inside of that TAM that haven't been built yet, but that would extend Veeva Vault footprint further into your pharma customers that would be made more competitive with Salesforce's existing offerings?

Well, what the move has allowed us to do, one way to think about the move to Vault CRM is it's unlocked a lot of potential for us. And you're hearing some of that. You heard our entry into service and marketing and patient and who knows there may be more in the future. There's things -- certainly things that we gave an indication that a little over half of our TAM that are covered by products that we do today. So there's certainly a whole lot more opportunity that remains. So there's a lot of places we can go, but there's also big markets that we're already in that we're just getting started and so -- and sometimes you figure out these new markets along the way. You have -- and a lot of our ideas come from just really deep partnership engagement with our customers. and sometimes new problems come up as you go along, as you get deeper and deeper. So it's not something that we overengineer as part of our operating model. We want to be agile. We want to think about what our customers need, what -- have a clear point of view on what the industry needs, and that's what we're building towards.

And in terms of Salesforce.com and so, obviously, a great company, a big company, a great tech company. But it's really industry-specific applications, especially in life sciences, that's really -- it's really not their thing. Or at least it hasn't been their thing. So there's no track record there of that. So they may do some things. Competition is always good for the market. As Paul said, if you look at what we're doing, has a lot of deep R&D applications, a lot of deep commercial and then the whole data cloud. So Veeva is doing something different than Salesforce. A company that's trying to do things similar to Veeva, I guess, would be IQVIA, right? But they've had their issues with software, et cetera. But we don't really see Salesforce's competition for the industry cloud for life sciences.

Our next question is from Stan Berenshteyn from Wells Fargo.

Peter, maybe one for you. So Data Cloud is [indiscernible] -- so any anecdotes from early adopters? And what's the excitement for clients regarding the planned Compass product expansion in early 2024?

Stan, the first part of your question broke off, I heard about Compass, but then it broke off.

Yes. So the first part is just regarding data cloud in general, it's still early, but any anecdotes from early adopters regarding this product and then specifically on Compass expansion in 2024? Any comments from clients regarding that as well?

Yes. Data Cloud is early. Some of it in there is a bit quite mature in terms of products, right, with OpenData, with Link Key People, we're doing very well in there. And some is very early. In Pulse, we just announced the direction, right? We won't have that product until '25, then Compass, as we've mentioned, that's a big, big market in the U.S. for the performance data, and we're early there. I would say Q3, we had our best quarter ever for Compass, signed up the most new logos and the most brands. Compass, has 3 parts. It has the Patient part, which we have today and then the Prescriber and the National. The Prescriber is the biggest part of the Compass for sure. And that we won't have till January. So a lot of excitement about that, but also the customers, that's critical. That's what you use for incentive compensation, et cetera, and they've used IQVIA forever for that. So they'll have to see our product before they adopt it. But -- so the progress has been on the Patient side. And that's where we can sell -- we sell by the brand. We sell our patient data by the brand. And there's good excitement in there because our patient data is better than the alternatives, most often. Our licensing model is simpler and people having success. They're finding out more about how their products are used because our patient data is more accurate. So we have some -- where a small biotech, they only have one compound, Hey, we already work with Veeva." We get this patient data with Veeva. "Hey, that was easy, we liked it." Oh, we can get data from Veeva. And then in a few of the top 20 specific brands are able to add Veeva data to complement their existing data because we can see parts of the data that their existing vendors don't. So that's what's developing this excitement. Compass is a game of interest. And it's just brand success, brand success by time. But the big watershed for us is January when we'll finally be able to complete the picture and have Prescriber and National, which are the projected data. That's the big deal. IQVIA has that. And there's an older company called Symphony that has that, but all these other data startups, they don't tackle that area because that's really, really hard, right? And that's what we're tackling. So I couldn't be more excited about Compass. Our product strategy really hasn't changed in the last year for Compass. And that's pretty exciting because then you know -- and you know that's working. You start to get those early feedbacks. All we got to do is execute. So it's a little bit more additive when you get feedback, you have to pivot. You get feedback, you have to pivot. Now we've done that a lot through our products, and we know how to do that but the feeling gets better when, "Hey, guys, we're not pivoting anymore because we're on the right track" we just got to grind it out. So anyway, as you can tell, I'm pretty enthused about Compass. I think it's going to be a great thing for life sciences. And the fact that it fits with OpenData and Link and Pulse using all the same -- like for example, I hope people did get a chance to listen to Madrigal. That's important stuff what they're doing, right? They can be preventing lots of people from having liver transplants. That's really important to that person and their family. So it's super, super, super important. That's what's called the disease area. And when we align all our products on disease area and you can get information from Pulse, from Compass, from Link, all around that disease area, that's what makes the power. So it's -- I think it's going to be transformative what we're doing in data cloud, just like Development Cloud has been transformative to the R&D side.

Our next question is from Tyler Radke at Citi.

So just going back on the demand environment, and I appreciate all the incremental disclosure we got this quarter just in terms of the mix between MedTech, biopharma and then within that, enterprise, CRO, SMB. But I guess, ignoring the services headwinds, which is understandable given the environment, how did subscription bookings compare relative to internal plan? And then just anything to call out in terms of where the weakness was most pronounced between enterprise and SMB and CRO. And then I had a quick follow-up for Peter.

Yes. So maybe the last part of your question is around where were you seeing more of the weaknesses on the service side of the business. So we saw both on the R&D and the commercial side. If you think about R&D, it's the biggest portion of our services business. So from a dollar perspective, it had a bit more of an impact. On the commercial side, it had a bit more of a percentage impact, if you can think of it that way. And the impact was across the customer base. That's how I would think about it. But it was more on, I would call that, post-implementation type activities. So I would focus there. And then your other question was around bookings. We don't guide around bookings. But what I would say is if you kind of look at our overall business, we're pleased with the momentum. We're pleased with the pipe. We're pleased how we're progressing those deals. So no real big surprises when I look at the subscription business and our ability to close business.

Got it. And Peter, the amount of product innovation and announcements this Analyst Day was pretty noteworthy. I can't remember a more action-packed Analyst Day. So it's great to see. I guess on the execution front, which certainly executed on building out multiproducts, I'm just curious how you would kind of evaluate the state of execution on some of these new product initiatives, given everything going on. And then I did notice that one of your leaders on the Vault CRM did move over to Salesforce. So just curious if you could comment on kind of the organizational leadership specifically within Vault CRM.

Yes. Thanks, Tyler. That's very insightful. Yes, we did announce -- if you really looked at what we announced, that was a lot, right? We announced a lot. We announced our seriousness and our big plan and data and how serious we are about commercial cloud and continuing add-ons into Development Cloud. And then by our TAM, we also announced, we see extra things we can do here, right? So I feel great about that because we laid out -- we said, hey, we're going to climb Mount Everest. And that feels good. And now you got to you just start climbing, right? What's difficult is I don't know which mountain I'm climbing, I don't know if I'm staying on Salesforce, moving off Salesforce. That's a lot of [indiscernible], right? But once you galvanize the team, here's where we're going, it feels much better. Now in terms of how we're doing an execution [indiscernible]. I do -- part of my job at Veeva is communication. So I do, for example, a quarterly company call and update. I do a quarterly call with all the managers about management processes at Veeva. I also do a quarterly call every quarter with the product management, that's a small set of Veeva, but critically important. And one of the things I always say there is product managers should never be satisfied. It's just the curse. So I'm never satisfied with our execution. We're never satisfied. It can always be better. But at the same time, I think we're top of the class, but that's different than being satisfied. There's always, always, always places to improve. And what you have to do is you have to get the operating model right for these different areas. You have to get the right leadership. So for example, marketing automation. We haven't started that yet. We're going to start it next year. Well, we better get that right leader, right? So that process is going on right now. So it's just that type of thing. I'm not satisfied, but I still think we're absolutely best-in-class. Our operating model is holding up. It's not by accident that Veeva can have success on all these areas. That would be statistically almost impossible from manufacturing to CRM where we started, the clinical trial drugs, that's mathematically impossible. It's our operating model that does that. So I'm happy, but not satisfied. And then in terms of the executive, Frank, is a longtime Veeva person. He started out in our services group. He went to our consumer products division. Last thing he was doing here was our commercial services area. So Frank was not leading our product area or he wasn't in charge with Vault CRM or anything like that. So I wish Frank the best, but it doesn't really change anything about what we're doing.

Our next question is from Jailendra Singh of Truist.

I want to go back to macro trends. Clearly, a lot of focus there. The way shares are reacting, it seems investors are concerned that there is more risk beyond the guidance cut. I understand your confidence in the pipeline, but clearly, sometimes macro trends can often be beyond your control. And we've seen that some of your peers who have taken multiple guidance cuts over the past 12 months. So a few points I want to clarify. First, did you say that the incremental slowdown you have seen since mid-third quarter, is that now spreading across more of your pharma clients? Or is it same pharma clients kind of delaying more projects? And then does your guidance for next fiscal year, I assume that some of these projects come back in any capacity?

Yes. Let me answer that last piece of that. So what we've assumed in our guidance is what we've experienced over the past quarter. That continues. So that additional scrutiny, that macro impact on some of the more discretionary services, we expect that to continue through fiscal '25, and that informed our guide. So that was included in our guide net assumption. We didn't assume that, that was going to get better. And then the other piece of your -- the other part of your question?

I was trying to understand whether it's how broad-based is it like, is there more risk there in terms of like more pharma clients are delaying projects or it's like same pharma clients who are using. Just trying to understand what -- how broad these concerns you're seeing in your market.

Yes. We're not seeing it. It's in pockets, I'll be honest with you. You can't just say it's applying to these customers in a similar way. Every customer is a bit different, but what we have seen is a bit more of a trend across a little bit of a broader swap in our services business. And again, it's that discretionary type stuff. They're looking for a little bit of efficiency in this macro. And so that's what we're seeing in our business. The -- it's really important, if you look at our execution on our subscription business. So we've executed and increased our guide during the year as we've continued to deliver as expected. So we haven't seen that, and it's because what we sell on the subscription side, this is mission-critical software, solving our customers' most critical needs. And so we haven't seen a change in focus there. We haven't seen a change in the competitive market.

And my follow-up on the same topic, given the trends you're experiencing, are you making any changes to your investment or capital allocation in terms of resources? Just curious, is there any change in strategy? Or do you think this is just a temporary and there's no need to deviate from your long-term focus? Maybe you want to talk about that.

Yes, we're always looking and focused on the longer term. So what's the longer-term growth opportunity, how can we drive customer success, how can we continue to innovate? So we're going to continue to invest, but we're going to do it in a disciplined way. We're going to be focused on, do we have the right people? Do we have the appropriate lean team? Okay, then that's an answer. We could accelerate customer success by maybe leaning in and investing a little bit more here. That's our approach. So we're not going to be shortsighted in how we think about the opportunity on investments. But again, we're going to be disciplined in our approach.

Yes. And I would say we're going to do the obvious thing, right? When we see services demand coming down a little bit, we're going to hire less in services, those types of things. But that's more incremental, no change in the long-term strategy of what we're doing.

Our next question is from Craig Hettenbach from Morgan Stanley.

Brent, I think the silver lining here is despite the headwind to services and revenue op margin coming in. So can you maybe just talk about just some of the levers, how you're managing that near term? And then longer term, how do you think about getting operating margins back to the high 30s?

Yes. So in the near term, we're executing well this year where our margins are holding with a -- or slightly up this year with the top line coming down. And that's because we're being disciplined. Peter just mentioned services are coming down, okay? So we're going to look at our services organization, and we're going to look at utilization and we're going to make the appropriate business decisions on how we manage that. So it's going to be a disciplined focus around that. So margins looking forward. We're not setting a target that we're going to be at X percent per se, other than what we've said that we're going to be 35% plus. There's an implied margin in the 2025 number. We're going to continue to focus on making the investments that make sense. And if we have the right team, then that's an answer as well. So we're happy with the team we have on board that are able to deliver the goals and targets that we have in front of us.

Got it. And then as my follow-up for Peter, you've been very clear from an M&A perspective that culture is important fit in terms of how you evaluate options out there. Given we've continued to see a resetting in valuations, how is the opportunity set looking? And how do you kind of look at opportunities in commercial versus R&D for inorganic growth potentially over time?

Yes. We look for a cultural fit. Most acquisitions don't work out. That's the fact. They all work out for the bankers and the lawyers, it all works out. But mostly, it doesn't work out. Those are the facts. And if you look at it, it's -- I think it's somewhat to lack of discipline. So we're very disciplined. All of our acquisitions have worked out. We look for cultural fit. First, we look for market fit. We'll decide market first and then see if we're going to build or buy, and then we have to have culture fit. And then timing has to work out because even if you want to buy, what if somebody doesn't want to sell? So I think now it's probably a little bit easier to buy things because the market is not so high. People are not quite so optimistic. I think we're more likely to buy things in the commercial area than the R&D area because you saw how our commercial cloud -- the new commercial cloud, that's really growing up. R&D, we got a lot of the footprint there, and Vault's a great platform for it. So there could be some in the data area, too, some tuck-in type things. But we're always looking, and we may find or we may not.

Our next question is from Brent Bracelin from Piper Sandler.

Peter, for you, I wanted to maybe take a step back. Next week, believe it or not, will be the 10-year anniversary of Veeva's IPO, if you can believe that. And just looking back over the last decade, Veeva was a growth darling, an enigma; 25% to 50% growth year in, year out, just phenomenal margins. The last 2 years, as you've approached $2 billion in scale, we've kind of seen mid-teens growth. You're now guiding to organic growth in the low teens next year. If I look at the business, $2 billion of a $20 billion TAM, you're not TAM-constrained. If I look at products, I think you have 6 of -- 6 products that account for the bulk of revenue. You're not product-constrained. So as you kind of think about the next decade for Veeva, is this a new normal that at this size in the markets that you serve where there's governors to how fast life sciences companies adopt product, should we kind of think about Veeva a little differently here as a kind of a mid-teens grower given the markets that you assume, or not?

Well, I would say, yes, it's certainly different than 10 years ago. I feel different. I feel 10 years older. But yes, going back 10 years ago, it was a small company, I don't know, a few hundred million dollars or something like that. And it was just a single product company. And this Vault thing was we were saying, "Hey, this is going to be big". And everybody says, "Well, gosh, the revenue is just peanuts." No, it's going to be big. So it's certainly a bigger company, and it's got more entry points and it's got some very mature products. So the growth rate slowing down, but it's -- gosh, it's a much more durable company. If you would have asked me 10 years ago, "Hey, is Veeva going to be around for generations?" I would say, well, I don't know. I don't even know how I would answer that question, right? Now I'm pretty sure it is going to be. So inside of life sciences, yes, we can't grow -- we grow 50% a year, that's going to be pretty hard, right? Because it takes time to adopt these things, right? It's hard in and it's hard out, and we've got a lot of scale. If we enter into some brand-new markets, that could be a way we could accelerate some things, but we'll have to see. Yes. So it's a new Veeva. I like it better than the Veeva 10 years ago just because it's providing more value.

Fair enough. And then I guess the flip side of that question is for Brent. As you think about the opportunity, you're clearly leaning in on product, but there are some natural governors in this market. Would you consider leaning in more on margin expansion to drive higher EPS growth for shareholders? Or again, it sounds like the focus is still on product. Just thinking through a couple of years ago, this was a 40%, 41% op margin model. You're kind of guiding to 36%. Is there an opportunity to maybe drive slightly higher EPS growth than revenue growth with little margins looking out over a longer-term period.

Yes, with the opportunity that we have in front of us, we're 12% penetrated. We think the appropriate focus is to do those investments for growth, to not just completely optimize for EPS. We're not at that place. We -- so that's our focus. We want to make sure that we're focusing on those areas that are going to drive that continued durable growth over time. And there's a lot of opportunity in front of us. So that's how we're thinking about it right now. It's not like we're going to -- we're looking to squeeze down on costs at the expense of growth.

Our next question is from Brad Sills with BofA.

A lot of exciting innovation here that you outlined earlier, a lot of new product coming out. Peter, maybe a question for you. I mean when you look across some of the things that you've rolled out here in commercial cloud, marketing automation, patient CRM. Is there anything you're excited about in commercial that you think might reaccelerate growth there? We've historically thought about Approved Email and territorial line is the key options, but I think you're probably getting close to full penetration there. So anything that you'd say at earlier stage that maybe we could see some reacceleration in the commercial business?

I would say Compass is the one. That's a big one. We're certainly early there, and we're starting to make some traction. And over the coming years, that could certainly start to be meaningful. That could happen. I think marketing automation, now that will take longer. That will take longer. Link is accelerating nicely. And in the commercial area, we have Link key people. We have key accounts coming. So it's really in the data cloud area, I guess. And then the marketing automation and patient service, that will come a bit later. We have to recognize we're taking some effort by doing this re-platforming, right? So that's in our -- commercial is going to take a little bit of a "Oh, okay, that's a big lift". We're doing all that effort to get these "new" customers on Vault CRM. That's not more revenue because we have them on BVA CRM. So we're taking that hit in the short term in the 2, 3 years here in commercial. But that's why we take the long term. We -- I think about Microsoft office, right? That's an important thing. That's very valuable for Microsoft, and it's very valuable for the people that use it. In Commercial Cloud, Data Cloud, and Development Cloud. That's kind of what we're building, but of course, much more impactful, right? We want to be the standard. That's what you do. And yes, those are going to be highly profitable businesses, but again, delivering at least 2x the value. If we take in $1 revenue, we want to deliver at least 2x the value. So we just have to -- in some ways, you got to think about we have to complete our office suite, and that's a marathon. If we do, and retain that customer success, man, we will be the industry cloud for life sciences. We'll be essential and appreciated to this industry. That's an outstanding position to be in. And Matt (sic) [ Brad ], you can imagine all the things you can do from there, right? All types of things you can do. We're a customer-centric company, do the right thing. But we also see we're not -- we're aggressive. We started out as a one-application company 10 years ago, at least the gentleman rightly said. That's not what we're doing now. We're doing this industry cloud for life sciences in the way we describe it. We're not going to just stop after we accomplish that, but it takes time.

A ton of sense. And then the other question I wanted to ask was around the data API for AI. When you think about kind of the evolution of AI for Veeva, are you at that point now where let's just get more data into Veeva and we'll figure out the workflow automation, the applications that sit on top of Veeva, some of the features that might come in here? I mean what -- how are you thinking about just where you are and the preparedness, if you will, for AI and on the data front and then kind of going forward? What are some interesting use cases that you think we should be on the lookout for?

Yes. And you said it well. We're putting in the foundation. So 2 things, it's direct data and API, which is that's groundbreaking stuff. I know a lot about APIs. I designed a lot of APIs under a different platform. This is new innovation. This is hard new innovation actually that we started working on about 2.5 years ago. It's that hard. So this is groundbreaking stuff, really happy about that. And then, yes, completing our suite. So we have all the data, and then making our own data in data cloud. Those 3 things just set you up perfectly to do AI things, industry-specific AI things. You would have sort of a really significant advantage on anybody else. And we're looking forward to doing that. But first things first, really.

Our next question is from David Windley from Jefferies.

My first one is around kind of taking this macro question, but maybe flipping the script. Your biopharma customers are always facing regulation, but maybe facing a couple of bigger ones in -- over the horizon, like inflation Reduction Act changing their pricing regime in the U.S. Maybe a smaller one, niche one would be Annex 1 manufacturing quality in Europe. I'm wondering if regulations like that are catalyzing your clients to pursue more integrated software. Do you feel that in the sales pipeline?

Yes, I'll take that one. Regulations -- we're in a very highly regulated industry. As you know, the regulations change frequently. When the regulations do change, our customers have to -- they have to be prepared to comply with the regulations. So in general, regulations accelerate or help our customers think more deeply about how they modernize, how they're ready to adapt and ready to comply. Technology is not always the answer. But in many cases, it can be the answer to compliance with regulations. We have obviously built into our platform. Vault, for example, is built specifically for life sciences, with a lot of the foundational pieces built into the application of support regulation. So we're -- we have an advantage in that we're able to help our customers often get to regulations faster and easier. Now that was kind of a generic and general answer. You're -- let's take one specifically, the IRA, which you talked about, it's about giving the government some ability to negotiate, even set prices that will happen over the longer term starting in 2026. Companies will feel the revenue impact of that over time. The -- it's causing companies to reprioritize, think about their drug development portfolio, should they invest in more large molecule versus small molecule. So this is an example of a regulation where it's creating -- it's forcing companies to think about prioritization rather than execution. So you can see the balance, right? In one respect, they need to comply. In another respect, it may create just some rethinking of priorities, which may delay some things. So it depends on the specific regulation, but I thought we'd use that one. It's a timely example of how our customers are rethinking about their portfolios, what investments they make when they launch lots of different things start to come into question again.

Got it. And then I wanted to ask a follow-up, kind of a similar topic but maybe reverse angle. So my sense is, and I think you think too, that Veeva has some significant market share opportunities in the clinical IT space, clinical operations, software space. Oracle, Medidata, both the old Faceforward business and Medidata, both now under parent companies and maybe don't have the focus that you do. So that's the opportunity. But in thinking about the current environment, I guess, and back to the mission criticality, what's the potential that customers in a budget-sensitive environment could "sweat" those assets more over the next couple of years and make slower decisions as a result, even on the software, not exclusively in services?

Yes. That will depend on the customer by customer basis. They can't sweat them for too long. They can't sweat them for too long, right? Because -- and they did -- actually, it's interesting, the -- what you call sweating them in, "Hey, just hey, just stay around". It's interesting during COVID, they did quite a bit of that. Because, hey, there was a lot of other things. They had to figure out digital there, they had to figure out this, they had to figure out that. Hey, just let that thing ride for a couple of years. So in some sense, it's already starting to be pent up. So I think those -- I think those 2 things will counterbalance because you're quite right that when times get hard, hey, can we delay just more. They've actually been delaying a little bit more than maybe they normally would have in the last 3, 4 years. I think they will counterbalance. Of course, that's a judgment call, right? It's -- I can't give you an exact math equation on that one.

Our next question is from Carolyn Valenti from Goldman Sachs.

First one that I wanted to ask would be just Brent commented on the commercial mix tracking a little bit better than the R&D mix. What's driven the upside in commercial relative to your original plan? And then why do you think the R&D is taking a little bit longer to build?

Yes. Maybe context to that statement. If you go back, we were talking 2019. Looking out, we're making a split of how we get to that $3 billion revenue target. Both are tracking ahead. So we're ecstatic, and very pleased with the progress we've made. And if you look at commercial specifically, we've made really good progress with the Link product offerings, right? If you go back 4 or 5 years, and you fast forward now, Link for key people alike, established product doing well. So those are some of the things that has helped us continue to beat the target and maybe be a little bit further ahead than R&D. R&D is a significant opportunity, right? So if you think about where we are across the opportunity space with the clinical data side and safety and all the quality applications. So we're excited about the opportunity. We're tracking ahead there, and that's going to be a big growth driver as we look beyond 2025.

And then as a follow-up, just how do you separate the cyclical pressure from any sort of secular trends? And specifically, like what catalysts over the medium term are customers speaking to that gives you confidence that software budgets at pharma companies will continue to grow?

I guess I'll take that one. Part of it is just being in the market and talking with customers and going to our customer summits. For example, in Q3, we had a really large customer summit, over 2,000 people in Boston for our R&D Summit. And so you just get the feeling of what's going on. They need to -- they're all -- everybody's talking about efficiency, right, getting efficiency. The only way you do that is through digital and data. That's the only way. And your operating model, of course. So yes, I just have confidence that that's the trend I've been seeing for 30 years. And I see no logical alternative. When I was running a pharma company, I don't know what else I would do to get more efficient, right? I can't just say, "Well, I'm just going to hire smarter people, right?" At some point, that becomes hard. You got to focus in on core capabilities. That's for the large pharma, right? Large pharma, top 50 pharma, top 20 pharma, they have a lot of products. They focus on product scale, getting them through the clinical trials, getting them to market. Now if you think about Madrigal, they're focused on speed, absolutely on speed, right? And so it's a different thing there. They want to get the tech all integrated together because they're focused on speed. A large pharma, they got to focus on their capabilities. But both sides got a technology. It's really the only way to get more efficient.

Our next question is from Charles Rhyee from TD Cowen.

I wanted to ask, maybe follow a little bit on the regulatory side and particularly drill down on your large biopharma customers. Has the IRA come into discussion at all yet? I know it's just been passed, and it doesn't kick in quite yet, but certainly some of the data points that we've seen or heard is that it could accelerate companies to do multiple trials at once or multiple indications at once. And if that were to occur, could that be an accelerant for growth for you guys? Or does large enterprise clients, that's kind of already included in what they're using it for?

Yes. It is driving -- so you're right in terms of the financial impact. The financial impact has not hit yet. In terms of the what impact is it having on how companies are approaching their drug portfolio, the investments they're making in trials, it is impacting. They're having those conversations. It's is causing companies to think and you can imagine all of the kinds of things that they're thinking about optimizing for. Do we develop a medicine that's not for the Medicare population versus something that is? Do we think about markets that -- multiple markets that may be smaller markets, which may mean a broader set of clinical trials rather than kind of a single blockbuster type thing? So those kinds of conversations and those thoughts are happening now because they'll play out over multiple years. Now does that become an accelerant? I don't know that it's a material change and how -- particularly given how we license our software, which tend to be more ELA-centric and immune, somewhat more immune or insulated from trial volume goes up or trial volume goes down. It's less associated with that. So -- oh, you're right, I do think over time, it will -- companies will need to become more efficient. This is part of the modernizing efficiency, and I think that trend in the long-term benefits Veeva.

I appreciate that. And Peter, basically a lot of the comments you gave earlier and as you thought about sort of the new products you're launching. You touched on sort of competition here and there as you kind of discussed some of these different products that you're -- and markets you're kind of entering into. But maybe can you give us a general sense of what the competitive landscape, what's that currently looking like and how has that changed over the last few years? And I guess the question being, with sort of the advent of sort of this next generative AI, does that open up the competitive -- more competitors? Maybe it's easier to apply technology and deliver some of these services. And just your thoughts on what the landscape currently looks like would be appreciated.

Yes. I would say now we're in multiple areas. So we're in clinical area, we're in quality and manufacturing, the commercial CRM area, the safety area. So we don't have one competitor across all of them. And the competitive environment is generally, I think, favorable for Veeva in all these markets. If you look at the clinical, there's some established players there. We feel like we have the innovation edge and then also we have clinical operations and clinical data, actually like we have the edge there. If you look in the quality and manufacturing area, there's 3 or 4. We compete with one company in the quality docs area, sort of Documentum kind of thing, it's almost gone. Sparta, we clearly have the upper hand there in the QMS, And the LIMS, it's just new. There's 2 legacy players there. There's a couple of legacy players in the safety area. I would say maybe our strongest competition is probably IQVIA in their core commercial data area, right? Because that's where they have a monopoly there, and they leverage that monopoly power, which we feel they do that illegally. And an antitrust suit is ongoing with them, and we hope it comes to trial next year. I would say they're the toughest competitor. Like Compass is going head on against the balance sheet that's using sort of monopolistic behavior there. So that's probably our hardest competitive environment. So it's going to depend on area but it's always dependent by area. We don't feel like we have anybody competing with us overall for the industry cloud of biosciences because nobody is really set out to do that.

No, I appreciate that. And -- what about smaller players, are you seeing a lot of new entrants applying kind of new technologies in this act? Is that an interesting area maybe to invest into as well for yourselves?

Yes. Sorry, I didn't get to that. No, we're seeing less start-ups because of the funding environment. In fact, a lot of smaller start-ups going out of business, et cetera, or just doing asset sales, et cetera. So definitely less. It's just a really rough time to be a start-up now selling in [indiscernible]. It's hard. So we're seeing less. Well, AI open up things, not against really our core market, I don't see that. An AI application is different than a data process workflow application, especially at generative AI. We have to understand generative AI is not what's called deterministic. It may not produce the same answer every time. It's a very, very different type of thing, the stuff we do. So we may have competition in those new areas, if we go in there, generative AI stuff. But I don't see for what we do. It won't come from the generative AI down to us, the competition. I don't see that happening.

And our last question will be from Saket Kalia with a follow-up question from Barclays.

Okay. Great. I'll try to keep it quick. Peter, Paul, for either of you, I just wanted to spend 30 seconds on CDMS very specifically. We won several top 20s, right, in a pretty short amount of time, which is really impressive. The question is, can you talk about the pipeline for more? Qualitatively, of course. And how do you just feel about the competitive backdrop there? It feels like it's getting better. I wonder if you could just go on a little deeper.

I can take that. Yes, we feel real good about the competitive backdrop there. We certainly have deals progressing. I won't give exact color on that. But when we set out to get into CDMS, the EDC area, I believe that was I believe that was 2016. I may have my number there incorrect, but I believe that's when we kind of made a decision, hey, we're going to do that. We said we want to be the leader by 2025. That would be maybe over 50% market share. So that would be a home run. I don't think we'll quite be there, but I'm sure we're on our way to being the leader. I'm not -- you can't be sure about the future. I feel quite confident that we're on our way because we have a structural advantage. We have a newer product. It's better in multiple areas. And we have clinical operations and clinical data. And then for example, we have our safety system, our drug safety system, and we're connecting that with our clinical data [ management ]. We sort of have an unfair advantage. So odds are on Veeva being the leader in that area. And it's progressing well. I always wanted it to progress faster. I would say we have to make more progress in the CRO area as well because that's key for the small biotechs, for the CROs that. They get their technology -- the small biotechs get their technology from the CROs. That's an area where we're in the EDC. We haven't done as well as maybe we should or could. So we probably have to tighten up our execution there, and that will come over time.

All right. That was the end of the Q&A session. I'll turn it back over to you, Peter, for any closing remarks.

All right. Well, thanks, everyone, for joining our Investor Day today. I really appreciate your great questions and you're coming on Zoom and you're being on camera, I appreciate that. And of course, thanks to the Veeva team for making this happen, and for our customers, including Madrigal, and all the other customers for your great partnership. And we really appreciate it. Thank you, everyone.