Veeva : Prepared Remarks ( PDF 281 KB )

August 31, 2022

Q2 FY2023 Earnings Prepared Remarks

Peter Gassner, Founder, CEO

Brent Bowman, CFO

Legal Disclaimer

These prepared remarks contain forward-looking statements regarding Veeva's expected future performance and, in particular, includes statements regarding Veeva's products and services and guidance provided as of August 31, 2022 about Veeva's expected future financial results. Estimating guidance accurately for future periods is difficult. It involves assumptions and internal estimates that may prove to be incorrect and is based on plans that may change. Hence, there is a significant risk that actual results could differ materially from the guidance we have provided in these prepared remarks and we have no obligation to update such guidance. There are also numerous risks that have the potential to negatively impact our financial performance, including as a result of competitive factors, customer decisions and priorities, events that impact the life sciences industry, issues related to the security or performance of our products, the pandemic, issues that impact our ability to hire, retain and adequately compensate talented employees, fluctuations in foreign currency exchange rates, and general macroeconomic and geopolitical events (including inflationary pressures and impacts related to Russia's invasion of Ukraine). We have summarized what we believe are the principal risks to our business in a section titled "Summary of Risk Factors" on pages 37 and 38 in our filing on Form 10-Q for the period ended April 30, 2022 which you

can find here. Additional details on the risks and uncertainties that may impact our business can be found in the same filing on Form 10-Q and in our subsequent SEC filings, which you can access at sec.gov. We recommend that you familiarize yourself with these risks and uncertainties before making an investment decision.

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Veeva, Vault, and Crossix are registered trademarks of Veeva Systems Inc.

Q2 Business Update

Peter Gassner, Founder, CEO

Financial Results

We had a solid Q2 with revenue ahead of our guidance and operating income coming in at our guidance. Overall, it was another great quarter of execution as we advance the life sciences industry to digital. Total revenue in the quarter was $534 million, up 17% year over year, and subscription revenue was up 17% to $429 million. Non-GAAP operating income was $202 million, or 38% of total revenue.

Fiscal Year Guidance and the Macro Environment

The life sciences industry is critical to human health. It works in long cycles and is generally less sensitive to macroeconomic fluctuations than most other industries. However, the industry is not entirely immune from the current environment.

Early-stage companies fuel a portion of the industry's growth through research and innovation. Tightening of funding for these companies impacts their investments. And since they are an innovation engine it also causes more conservatism in the industry overall, as does the building macro uncertainty.

We started to see effects of these headwinds on our pipeline in June. Therefore, we are taking our full-year revenue guidance down slightly by $30 million, or about 1.5%. Roughly half is related to foreign currency (FX), and half is related to macro factors including lower spending among SMB companies and extra project scrutiny on some enterprise opportunities.

There is no change to our long-term opportunity or our 2025 financial goals. We continue to track ahead

of our target to exceed a $3 billion revenue run rate in 2025. Our competitive position and innovation engine have never been stronger and our strategic partnership with the industry is increasing.

Times like these are long term positives for companies like Veeva because high quality, vibrant, and profitable leaders are well positioned to further consolidate market share and attract top talent. We are seeing the benefit of this flight to quality in our competitive momentum, hires, and rehires. Speculative tech startups are no longer as attractive to customers and employees as they were a year ago.

Drug Pricing Legislation

Before we move to our results for the quarter, I wanted to touch on the U.S. drug pricing legislation just passed that allows for the government to set the maximum Medicare price manufacturers can charge on select drugs starting in 2026. The legislation does not impact drug pricing under private coverage and there is time for the industry to manage and adjust over many years until any pricing changes go into effect. Therefore, we don't expect this legislation to impact Veeva in the short or medium-term. Any long-term impacts will become clearer as the industry adapts.

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Commercial Solutions

Our leadership in commercial continues as we innovate to advance the industry to new digital ways of working.

Q2 marked another quarter of Veeva's expanding leadership position in core CRM, both from an innovation and a market share perspective. We added 12 new SMB customers and saw further international CRM expansions in Asia and Latin America. This resulted in net seat growth in the quarter.

Being the industry standard in core CRM gives Veeva the ability to provide valuable data and insights from more than 130 million quarterly interactions between life sciences and their customers. In July, Veeva Business Consulting published its first Veeva Pulse Field Trends Report to share this unique industry-wide view of global HCP engagement. The groundbreaking research showed the power of the new digital models we're enabling including how online meetings, when used in conjunction with in-person engagement, increases impact 3x.

Moving into other areas of commercial, we are also pleased to see our leadership position expanding in commercial content. The modular content capabilities in Vault PromoMats are helping companies develop content faster and increase content reuse. In the quarter, we had 22 SMB customer wins and saw a commitment for a major expansion at a top 20 pharma.

In data, we are encouraged by our progress across Veeva Data Cloud. Veeva Link for Key People had another strong quarter with 10 customer wins and further momentum among enterprise accounts. Development of our four new Link products is also tracking well.

In Veeva Compass, we added four new customers in the quarter. Feedback from early adopters has been positive. While Compass remains very early in its product and customer lifecycle, and it will take time to realize our vision, we are making good progress in providing an alternative for patient, prescriber, and sales data to the industry.

R&D Solutions

On the R&D side, we saw further adoption across all areas of Veeva Development Cloud. Companies are increasingly looking to Veeva to put in place the right technology foundation for drug development.

Vault Quality had a record 52 customer wins in the quarter. We now have more than 500 customers with at least one Vault Quality product and our focus is on their success, giving us a great base from which to grow. New product innovations in Vault Quality are also progressing well. We expect to have early adopter projects started for Vault LIMS and Vault Validation Management later this year.

In clinical operations, growth was driven by both established and newer solutions. We had 15 eTMF customer wins in the quarter and saw strong growth in CTMS as well. And it was a good quarter for Vault Study Startup. We added two new top 20 pharmas, both now have more than one Vault Clinical application and a vision for unified clinical on a single platform.

Momentum continues to build in clinical data management as well with Vault CDMS, especially in enterprise accounts. These are long sales cycles, and it will take time to generate significant revenue, but I am very pleased by our progress with the product and customer success. Customers appreciate the innovation we

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are bringing to market and the tight integration of clinical operations and clinical data management as they look to unify and speed clinical execution. I am confident we are on a path to becoming the market leader in CDMS over time.

Our momentum also continues in regulatory with 15 wins in the quarter, including a top 20 customer selecting Vault Submissions, Vault Submissions Archive, and Vault Publishing. This customer had previous success with Veeva in clinical and quality and looked to Veeva when it was time to modernize their core regulatory systems. This win is a great example of how our opportunity is fueled by customer success.

Establishing Veeva Development Cloud as the operating system for drug development is a big vision. We are early in the journey and executing well on our plan.

Employee and Customer Rights

Lastly, we had another positive development in the quarter as a federal court dismissed the baseless trade secret lawsuit Medidata filed against Veeva in 2017. This is a major win for employee rights and the life sciences industry as the court ended Medidata's moves to limit competition and intimidate employees.

I hope this ruling encourages others to focus their energy on innovation and employee success rather than unnecessary and harmful litigation. I also hope it encourages other leaders to stand-up for employee rights.

Leading Through Innovation and Focused Execution

We are well positioned for the significant market opportunity ahead with an innovation engine that's never been stronger and the disciplined execution that sets companies apart in times like these. Our strategic partnership with the industry is increasing, and our values of do the right thing, customer success, employee success, and speed continue to provide Veeva a distinct advantage.

Peter Gassner, Founder, CEO

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