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Veeva Systems (NYSE:VEEV)
Q1 2018 Earnings Conference Call
May. 24, 2018 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Veeva Systems Fiscal 2019 first-quarter results conference call. [Operator instructions] Mr.

Rick Lund, head of investor relations, you may begin your conference.

Rick Lund -- Head of Investor Relations

Good afternoon, and welcome to Veeva's 2019 first-quarter earnings call for the quarter ended April 30, 2018. With me on today's call our Peter Gassner, our chief executive officer, Matt Wallach, our president, and Tim Cabral, our chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, our strategies and the anticipated performance of the business. These forward-looking statements will be based on management's current views and expectations and are subject to various risks and uncertainties.

Actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-K, which is available on the company's website at veeva.com under the Investors section and on the SEC's website at sec.gov. Forward-looking statements made during the call are being made as of today, May 24, 2018. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information.

Veeva disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but we'll not provide any further guidance or updates on our performance during the quarter, unless we do so in a public forum. On the call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K filed with the SEC just before this call.

As a reminder, beginning this fiscal year, we adopted the new revenue-recognition standard commonly known as ASC 606 using the full retrospective method, which means that we have adjusted certain of our fiscal 2018 financial information according to the new standard. Please note that all results and guidance mentioned on this call and contained in our earnings release reflect the application of ASC 606. With that, thank you for joining us, and I will turn it over to Peter.

Peter Gassner -- Founder and Chief Executive Officer

Thank you, Rick, and thanks to everyone for joining us today. I'm pleased to report another strong quarter for Veeva with financial results above our guidance. First-quarter total revenue was $196 million, up 22% year over year. Subscription revenue grew at 21% and our non-GAAP operating margin was 32%.

It was a great start to the year. The Veeva team executed exceptionally well. I'm encouraged by the pace and level of innovation we're delivering for customers and the life sciences industry overall. I'm also encouraged by our continued execution and attention to detail as we scale the company in multiple product areas, customer segments and geographies.

We just got back from Veeva Commercial Summit, where we brought our customers together for a great event in Philadelphia. This year, we had 1,500 attendees, making it our largest event ever and the biggest commercial life sciences gathering of its kind. At Summit, we announced a major new product, Veeva Nitro. Nitro is a next-generation commercial data warehouse built specifically for life sciences.

Nitro was very well-received because it has the potential to eliminate another major custom system that has been a real burden for our customers. It also sets up customers to fully leverage the power of AI as they look ahead. Today, life sciences companies largely build and maintain their own custom data warehouses for the commercial side of the business. It's a significant challenge and often repeated on a region-by-region basis.

First, it's hard to find the right resources to build and maintain a data warehouse. Once developed, these point-in-time systems quickly fall behind and they end up being replaced every five years or so. And most were built for business intelligence and reporting only. So they don't provide the right foundation to support AI.

It's similar in many ways to what we saw with CRM 10 years ago or content management five years ago and that the market is not being served well with any packaged cloud solution. So customers are having to piece things together themselves. Veeva Nitro offers a next-generation data warehouse built specifically for commercial life sciences. Veeva Nitro is a packaged cloud software solution that continually improves over time and includes an ecosystem of services and solutions around it.

It includes a prebuilt data model and prebuilt connectors for key data sources so companies have a data warehouse that's architected to quickly support their global and regional needs from analytics to reporting to AI. Veeva Nitro is a big deal for the industry and for Veeva. It's a long-term commitment to a significant and important area. It could eventually help to transform customer engagement in life sciences for the better.

And it's Veeva's first true analytics application, which will stretch us in new ways. Nitro is about innovation for the industry and for Veeva. Nitro's currently available in Japan for early adopters and planned for North America by the end of 2018. At Summit, we also let customers know of our intention to develop an AI engine specific to commercial life sciences that would use Nitro as its data source.

AI is an important technology where I believe Veeva can provide a valuable offering. We also think choices needed at the AI layer and we fully support our partners like Oktana and ZS who currently provide AI solutions for our joint customers. We're looking forward to working with Oktana and ZS to leverage Veeva Nitro as a data foundation for their AI solutions. Now turning to our results for the quarter.

First, in Commercial Cloud, where we had another excellent quarter in core CRM and the CRM add-ons. For example, in Q1, another top 50 pharma committed to use -- to expand their use of Veeva CRM to their European field force. They chose Veeva because they know Veeva CRM works well and they trust Veeva as a long-term partner. It also supports their drive to harmonize systems, which is a continuing trend we're seeing that's driving enterprise customers to standardize on Veeva CRM globally.

We're seeing the continued momentum of the Veeva CRM within small and midsized companies as well, with 14 new SMB customers added in the quarter. Uptake of the CRM add-on products also progressed quite well in Q1 with a number of wins including a top 20 pharma who selected Veeva CRM Events Management for their U.S. teams. Overall, we're very pleased with the performance of Veeva Commercial Cloud and excited about the opportunity to extend the value we provide with Veeva Nitro.

We also had another excellent quarter for Veeva Vault. On the R&D side, Veeva Development Cloud is really resonating. With development cloud, we are uniquely positioned to help customers streamline drug development with unique application suites for clinical, quality regulatory and, soon, safety, all built on a single modern cloud platform. We believe this will be transformational for the industry over the long term.

A key development cloud win in Q1 was with a top 50 pharma who selected Veeva Vault eTMF, Vault Submissions, and Vault Submissions Archive as their enterprise standards worldwide. This customer was prompted by the need to unify systems and processes and improve compliance. They're an existing Commercial Cloud customer and these new applications are their first purchases in R&D. When they're successful with these products, there's the potential to expand to other areas of Veeva Development Cloud over time.

In addition to the top 50 RIM win in Q1, we also had a top-five pharma go live in the quarter with the first phase of their Vault RIM project. This go-live is very significant because it's our largest RIM go-live to date and a big milestone for our regulatory products. Congratulations to the customer and the Veeva team for achieving this important milestone together. It was also another great quarter in quality and in clinical with a number of notable new wins in go-live.

In the clinical operations area, eTMF continues growing strong. Q1 was our second best quarter ever for Vault eTMF sales. We also secured our first win at a top 20 for Vault Study Startup. Study Startup is a relatively new software category emerging to address an area that's historically been underserved.

Once live, we anticipate this could be an important lighthouse account for the industry as they look to gain considerable efficiency in the Study Startup process. Vault eTMF also continues to gain traction. We now have 24 customers with 10 live. This is amazing progress for a product that has only been available since April of last year and is a strong indication of the pent-up need for innovation in clinical.

Vault EDC is also progressing well. We now have nine early adopters and three are live. Our early customers are happy and enthusiastic about the product. One of our first live customers and their CRO presented at the clinical data event we held in Q1 in Boston.

They detailed their success with Vault EDC, specifically citing the modern technology and speed of study-build advantages they gained with Veeva. It is still early days for Vault EDC, but I believe we are on the right track and can be a new long-term leader. Finally, I want to give a brief update on Vault QualityOne, our quality product suite for companies outside of life sciences. We added new customers in the quarter and continued to make excellent progress with early adopters in their deployment.

The team is preparing to host their first customer event next month in Cincinnati, which is an important milestone and will be a great form for our early customers to share their successes and lessons learned. In summary, it was another great quarter. Our pace of innovation, technology leadership and focus on customer success continues to give Veeva a major strategic advantage. We are paving the way for strong growth well into the future with a broad and growing suite of products.

I appreciate the great execution by the Veeva team and the trust and confidence of our customers and partners. With that, I'll turn it over to Tim to review our financial results in more detail.

Tim Cabral -- Chief Financial Officer

Thanks, Peter. Q1 was another quarter of consistent strong execution. Subscription revenue was up 21% to $156 million from $129 million last year. Momentum across our product lines continue to drive strong growth especially within Vault.

Services revenue was more than $39 million, up 29% from over $30 million a year ago. This was a material outperformance from our expectations, primarily driven by heavy demand within Vault R&D. In addition, we did benefit from some one-time items in Q1. So we expect Q2 will likely be $1 million to $2 million less sequentially.

Total revenue was over $195 million, up from nearly $160 million a year ago, a 22% increase. Vault represented 44% of total revenue, up from 37% in Q1 of last year. Our non-GAAP operating income came in at almost $63 million, a 32% operating margin, which was above the high end of our guide. This was driven primarily by outperformance on the top line.

Across the company, we added 72 people net in the quarter, finishing at 2,243, up from 1,874 a year ago.Turning to the balance sheet. Deferred revenue was $290 million, compared to $267 million at the end of the fourth quarter. This resulted in calculated billings of $214 million, which was ahead of our guidance of $200 million to $202 million. This result was driven by the outperformance in services revenue, better-than-expected billings duration before the business closed in Q1 and strong bookings.

Please remember that there are numerous factors that make year-over-year comparisons of this metric highly variable on a quarterly basis. Therefore, we do not believe it is a good indicator of the underlying momentum of our business and we do not manage to it internally. Our subscription revenue guidance and calculated billings guidance for the full fiscal year are the best indicators of our momentum. Looking ahead, we expect calculated billings of roughly $175 million in Q2 and $900 million to $905 million for the full year, which is an increase from the $875 million to $880 million guidance provided last quarter As you consider the full-year guide, please note that during the first quarter, we had a large customer move their renewal date from Q1 to Q4.

This means we billed the customer for nine months in Q1 and we will bill them again for the full annual amount toward the end of Q4. This results in an incremental $18 million worth of calculated billings for fiscal '19, which is included in our guidance for calculated billings. Additionally, with this dynamic, we are now expecting about 41% to 42% of our billings for the year to come in Q4. When considering calculated billings, please remember that with the adoption of 606, the new formula for calculated billings is now revenue plus change in deferred revenue minus change in unbilled receivables.

Elsewhere on the balance sheet, we exited Q1 with $918 million in cash and short-term investments, up from $762 million at the end of Q4. This increase was driven by our performance in cash from operations, which came in at $151 million. One thing to note: we issued an invoice late, which resulted in a collection of $20 million in early May that normally would have been collected in Q1. Also note that Q1 cash flow benefited from about $10 million worth of excess tax benefit related to equity compensation.

For the full year, we now expect cash from operations to be at least $240 million, excluding this excess tax benefit. Let me wrap up by sharing our outlook for next quarter and the rest of the year. For the second quarter, we expect revenue between $203 million to $204 million, non-GAAP operating income of $64 million to $65 million, and non-GAAP net income per share of $0.33 to $0.34 based on a fully diluted share count of approximately 155.5 million. For the year, we now expect revenue in the range of $826 million to $830 million, an increase from our previous guidance of $815 million to $820 million.

We now expect subscription revenue to be roughly $680 million for the full year. We continue to expect Commercial Cloud subscription revenue growth of about 10% over last year and Vault subscription revenue growth of more than 40%. For fiscal '19, we now anticipate non-GAAP operating income of $261 million to $265 million, a margin of almost 32%. This is an increase in both dollars and margin from our prior guidance of $250 million to $255 million and a margin of about 31%.

We are now targeting non-GAAP net income per share of between $1.36 and $1.38 based on a fully diluted share count of approximately 156 million. To conclude, I'm very pleased with the way that our team has started the year and with our increased outlook for the remainder of the year. Our field teams are executing and our product teams continue to innovate. Given this consistent execution, we remain confident in our ability to deliver at least 20% subscription revenue growth through 2020.

And new products like Nitro, an opportunity similar in size to our core CRM product, provide us with yet another vector for driving growth over the longer term. As always, thank you for joining the call, and I will now turn it back to the operator for questions.

Questions and Answers:

Operator

[Operator instructions] And your first question comes from the line of Rishi Jaluria from D.A. Davidson. Your line is open.

Rishi Jaluria -- D.A. Davidson -- Analyst

Hey, guys. Thanks. Thanks for taking my question. Want to dig a little bit more into Nitro, definitely an exciting announcement.

I guess to start I would -- can you talk a little bit about the decision to use AWS Redshift and maybe what the economics of the partnership looks like? Is it going to be something similar to CRM? And maybe alongside that, why the partner versus building kind of your own system from the ground up like you do with the Vault? And then I have one follow-up.

Peter Gassner -- Founder and Chief Executive Officer

OK. Great. This is Peter. I'll take that one.

Yes. When you look at Nitro as being a commercial data warehouse application, there's many technologies that would go into that, some of which we're going to build, some of which we're going to embed in. At the database layer, Amazon Redshift was a clear right choice because this is a data warehouse type application. We want to do it in the cloud, and Redshift has really emerged as the great database and a clear leader there.

In terms of the economics, we won't get into the specifics there, but I think we're not going to see very material cost of goods sold on Nitro and I would say less than what we'd see cost of goods sold on our CRM product, but we'll see how that plays out over time.

Rishi Jaluria -- D.A. Davidson -- Analyst

OK. That's helpful. And I guess kind of following up on that, can you give us a sense for how the integration between Nitro and Vault and Commercial Cloud solutions might look like once the product's scaled out?

Peter Gassner -- Founder and Chief Executive Officer

In terms of the integration, that will be a key part of the value proposition. So between, for example, Nitro, it's focused on the commercial area. So the key integrations -- a couple of our key products are Veeva CRM and the Vault PromoMats. So we'll build that integration in a very seamless way so that customers won't have to build it, won't have to maintain it, and that's a pretty complex integration.

So you're right to point out. These integrations are a core part of the value prop and that's a core part of the value we're delivering.

Rishi Jaluria -- D.A. Davidson -- Analyst

Okay. Got it. That is helpful. And maybe if I can sneak in a housekeeping question for Tim.

When you talk about your calculated billings expectation for the next quarter and following year, that is including the new definition of calculated billings with unbilled accounts receivable, correct?

Tim Cabral -- Chief Financial Officer

That's correct, Rishi.

Rishi Jaluria -- D.A. Davidson -- Analyst

OK. Great. Thanks, guys.

Operator

Your next question comes from the line of Pat Walravens from JMP Securities. Your line is open.

Pat Walravens -- JMP Securities -- Analyst

Oh, great. Thank you, and congratulations. Just following up on Nitro. Can you talk a little bit, Peter, about what the most common use cases would be? I mean is it things like paralyzed correlation between genes and specific diseases? Or is it things like sales force productivity.

Peter Gassner -- Founder and Chief Executive Officer

The common use cases are sales force productivity, marketing productivity, which types of content are being the most effective, predicting, in some ways, sales, forecasting. And then also when we look in the AI use cases, that's about -- for example, it could be at a specific sales rep or the specific sales manager level what to do in the next week, some suggestions about what to do, also maybe what not to do in the next week. So those are the most common use cases.

Pat Walravens -- JMP Securities -- Analyst

OK. Thank you. And why start in Japan?

Peter Gassner -- Founder and Chief Executive Officer

For Japan, Matt, do you want to take that one?

Matt Wallach -- Co-Founder and President

Sure. Yes. So Japan has some specific market dynamics that are different from anywhere else in the world. Specifically, the distributors actually send daily sales data that has to get all the way out to the sales reps.

And so we had customers for the last few years really pushing us to help them to solve that problem. And so it just seems like the ripe opportunity to get started in the data warehousing space there. But with the use case, that's slightly different than what we'll see in the rest of the world.

Pat Walravens -- JMP Securities -- Analyst

OK. Thank you.

Operator

Your next question comes from the line of Brad Sills from Bank of America Merrill Lynch .Your line is open.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Great. Thanks for taking my question. Just wanted to ask about the top five, your RIM deal, obviously, you're seeing real traction at that end of the market with regulatory.

What's your expectation for clinical? Would you see some potential validation in regulatory for clinical in some of these top 20 accounts?

Matt Wallach -- Co-Founder and President

Sure. Hey, Brad. It's Matt. So yes, it was a big deal that we celebrated that big first go-live in RIM, and clearly, there's connections between all of the different areas within development cloud.

So at a lot of our big RIM customers that actually started with clinical, and that influenced their appetite for doing something in RIM and for quality. And the one that we just referenced this one that just went live, actually their first Vault development cloud application was RIM. And so we're hopeful that over time that will influence the clinical and quality area. But for sure, we see that influence across the industry with large and small companies, and there have been some patterns in the order in which companies approach it, but it really just depends upon where their business needs start.

What we've seen consistently, though, no matter where they've started, is that the ability for us to cross-sell the next solution is really aided by a successful implementation of the first one, not unlike what we've seen in other parts of our business.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, Matt. And then maybe one on safety. I know it's early, but if you could provide any color on where you're seeing early interest, maybe some low-hanging fruit in the pipeline, just opportunity for safety.

Matt Wallach -- Co-Founder and President

So actually your first question is a good lead-in to the safety one because safety systems have to be integrated to quality systems, clinical systems, and regulatory systems. So the more companies have adopted the development cloud, the more likely they are to look at safety as a logical next step. What we've learned in the last 90 days was basically more confirmation that we're on the right track. We've been engaging with dozens of companies that are getting more and more excited for the arrival of that product later this year.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thank you so much, Matt

Operator

Your next question question comes from the line of Kirk Materne of Evercore ISI.

Daniel Greenfield -- Evercore ISI -- Analyst

Hi, guys. Thanks for taking my question. This is Daniel Greenfield on for Kirk. Just wanted to touch base on the partner channel again.

I mean do you guys feel like as your portfolio broadens, you're going to need to expand on that more? I guess just talk about the evolution of that ecosystem as you guys become a more strategic platform vendor. Thanks.

Matt Wallach -- Co-Founder and President

Hey, Daniel. So I would say if we look at it through two lenses, one is the very large systems integrators, I think the broader product portfolio is making us a more and more important part of their go-to-market strategy and their revenue growth. So large SIs are getting more interested in working with Veeva and our customers as we have a broader portfolio of solutions to bring. Then on the smaller sort of niche partner side, each time we go into a new space, there is a whole collection of companies that is specialized just there.

So in safety is a great example. There's a big ecosystem of safety-specific companies that we never spoke to that now we're starting to talk to. I think we'll see similar things around data warehousing and AI as that evolves over time as well. So the partner channel is basically as important as it's always been and we're able to replicate a lot of the way that we work with them when we go into new areas.

Daniel Greenfield -- Evercore ISI -- Analyst

Great. That's helpful. Thanks.

Operator

Your next question comes from the line of Scott Berg from Needham. Your line is open.

Scott Berg -- Needham & Company -- Analysts

Hi, everyone. Thanks for taking my questions here. I guess I got -- well, just one quick one. Tim, you had kind of reiterated the company's expectations that continue growing subscription revenues at a 20%-plus rate through 2020.

Just wanted to know how you guys are thinking about that from maybe a product-contribution standpoint now that we're six months further into discussing those goals? We know Vault's going to be a major driver there, at least generically of that growth during that time frame. But new products like Nitro, how much do they factor into helping drive those goals?

Tim Cabral -- Chief Financial Officer

Yes. If you think about, Scott, the new products like Nitro, we will approach the go-to-market similarly to other new products that you've heard us announce and bring to market over time, which is we start with the early adopters and we spend a bit of time there, maybe in the course of one to two years to really make sure that those early adopters are being incredibly successful before we move into the reference selling model and then revenue will scale out from there. So specifically, Nitro doesn't really materially contribute to that time period that you're talking about. It will contribute more to the post-2020 time frame.

Scott Berg -- Needham & Company -- Analysts

Got it. Very helpful. Thanks for taking my question.

Operator

Your next question comes from the line of Sterling Auty from JPMorgan. Your line is open.

Sterling Auty -- J.P.Morgan -- Analyst

Yes. Thanks. Hi, guys. So just along the Nitro question line, I missed it if you said it, but how should we think about what the total addressable market for the solution would be? And what are the technologies that it would actually be replacing? From what companies?

Matt Wallach -- Co-Founder and President

Sure. Hey, Sterling. Glad you're able to make it to the call. So Nitro -- data warehousing is a big and valuable space for life sciences companies.

In the commercial space, it's one of the largest areas of spend. So when we look at the market for Nitro specifically, we look at it as similarly sized to the base CRM market. In terms of what we replace, there is no single vendor that is the leader there. So it's a collection of companies that have outsourced data warehouses that are built on a number of different technologies.

There's still some old Teradata or Netezza appliances and databases out there but there's never been an application. So there's never been a cloud application where on the first day of the data warehousing project, the data warehouse is done and all of the Veeva CRM and all of the Vault PromoMats data is already in it. And then the project is to add other third-party data sources and to build the BI layer with familiar tools like Tableau and Click. So we're not replacing anything that looks like Nitro but the job that Nitro will do has been done by a collection of different kind of custom-build and cobbled-together systems over the last few decades.

Sterling Auty -- J.P.Morgan -- Analyst

Great. Thank you.

Operator

Our next question comes from the line of David Hynes from Canaccord. Your line is open.

David Hynes -- Canaccord Genuity -- Analyst

Hey, thanks, guys. So just two related questions tied to the CRM, the core product. Curious, update on kind of the add-on pipeline. I mean it seems like most of the innovation we're hearing you guys talk about is involved in new markets and now the data warehouse.

Curious, is there still a focus on the add-on pipeline? What should we expect is coming? And then the second part of that question is how do you think about pricing as a lever to growth for the core CRM?

Matt Wallach -- Co-Founder and President

Sure. So I'll take the second question first. I really like looking customers in the eye and telling them that we have never raised their price. So a company that bought Veeva CRM 11 years ago pay the exact same price, and we hope to be able to do that into the future.

So we do not plan to use any kind of pricing power to grow the company. In terms of the add-on pipeline, so I'm not sure. Are you asking about the add-on products we have today that we haven't talked a whole lot about? Or are you asking about other potential products...

David Hynes -- Canaccord Genuity -- Analyst

Yes. I was more asking not necessarily what's to come but should we expect there to be the introduction of additional add-ons. I mean it was a pretty powerful lever to drive. And I think you've talked in the past around 15% to 20% uplift on CRM pricing for every incremental add-on.

We haven't had many incremental add-ons released lately. So curious how you're thinking about that as fiscal '19 plays out.

Matt Wallach -- Co-Founder and President

Yes. So through this year, I think the focus is going to be on some of the ones that we still consider to be brand-new, Engage Meeting and Engage Webinar. Engage Webinar, combined with the Events Management module, is really quite powerful, and we're just at the very, very beginning of that. And then since we're talking about add-ons, I think it's a good distinction that let's not think about Nitro as an add-on, right? So Nitro is a market similarly sized to CRM.

So we'll talk about CRM and CRM add-ons in a similar way that we have them. And when we talk about Nitro, it's going to be a little bit of a different narrative.

David Hynes -- Canaccord Genuity -- Analyst

OK. Yes. Makes sense. Thanks, guys.

Operator

Your next question comes from the line of Bhavan Suri from William Blair. Your line is open.

Bhavan Suri -- William Blair & Company -- Analyst

Hey, guys. Thanks for taking my question and congrats. I guess just [Inaudible] that Takeda-Shire merger. Does that have any [Inaudible]

Peter Gassner -- Founder and Chief Executive Officer

Bhavan, I'm sure the transcript won't get it, but I think I got the question. You're asking about the Takeda-Shire merger? So we've...

Bhavan Suri -- William Blair & Company -- Analyst

Correct. The impact to Veeva.

Matt Wallach -- Co-Founder and President

Yes. We got it. So we've always said on these calls the high volume of mergers and acquisitions in this industry had been neutral to positive for Veeva, and [Inaudible] that a megamerger would be negative. Now the Takeda-Shire merger would be the largest one that we've seen since starting the company, but the two companies don't operate in a large number of overlapping therapeutic areas.

It's just a couple. So they're unlikely to stop any clinical programs and unlikely to have large layoffs in the sales force. So from a financial perspective, the future impact would be maybe a slight headwind but it would not be a material change even though it's such a large merger. But I would say, more importantly, we have a strong partnership with both of those companies and we're going to work closely with them through this merger to make sure that it even gets stronger as a result.

Bhavan Suri -- William Blair & Company -- Analyst

Got it. That's helpful. And then I'll just ask a quick one on the CRO initiatives. You've been targeting those guys, just love to get some color on where you are, any progress you've made, and sort of how you've seen sort of any successful sort of engagement with those guys.

I know I think PAREXEL may have been a RIM and a submission customer, I forgot exactly, but I was wondering if you have any updates to that business.

Peter Gassner -- Founder and Chief Executive Officer

CRO business continues to go well. I won't give any comments on any particular customer. But the general dynamic that's going on, the CROs, they have to serve the life sciences industry. They serve the very large life sciences customers.

They serve all the way down to the very small. So they have to be aware of their needs and what they're doing. The CROs will see and are seeing our broadening footprint, that it's serving many different parts of life sciences, especially on the R&D side. So we're getting -- we, Veeva, are getting more strategic with their customers.

So that's one thing they think about. And the second thing is that our footprint that we can sell into CROs is continually getting broader especially as EDC moves forward and when it moves out of the early adopter stage. So while I don't have anything specific to report, certainly, our momentum and our pipeline is doing well and we have a specialized team focusing on CROs. So I'm quite confident with that business over the long term.

Bhavan Suri -- William Blair & Company -- Analyst

Great. Thanks for taking my question, guys.

Operator

Your next question comes from the line of Brian Peterson from Raymond James. Your line is open. Again, the next question comes from the line of Brian Peterson from Raymond James. Your line is Open.

Your next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is open.

Stan Zlotsky -- Morgan Stanley -- Analyst

Hey, guys. Thanks for taking my question. and congrats. So a couple of quick ones for me.

First one, just going back to Nitro, how does the product fit in with your existing data products, right? So you, like, network and everything else you have on the data side because that seems like a very natural extension. And also how is network -- how is it rather Nitro going through price? And then I have a quick follow-up for Tim.

Peter Gassner -- Founder and Chief Executive Officer

In terms of Nitro and how it relates to Network and OpenData, Nitro is not dependent on Network or OpenData, so it will -- Nitro will work whether the customer uses our network product or whether the customer uses a competitive product or whether the customer uses OpenData or whether they're using a competitive product. There is a requirement for Nitro that you have to be using Veeva CRM because that's where the core of all the activity data comes from, etc. So that's the lay of the land there. We want to be very open in the Nitro layer but it's just not -- there's a large part of the industry uses Veeva CRM and it wouldn't be practical to build Nitro and try to figure out the data mapping with a non-Veeva CRM system.

And in terms of the pricing for the Nitro, was there a specific question there?

Stan Zlotsky -- Morgan Stanley -- Analyst

Is it going to be per-user pricing? or is it going to be based on volume of data?

Peter Gassner -- Founder and Chief Executive Officer

Yes. And then for the specific pricing that way, that's something we'll work out with our early adopters, and usually we don't discuss that at this time, but we're looking at a variety of options and I'm sure we'll settle on the right things for the customers.

Stan Zlotsky -- Morgan Stanley -- Analyst

OK, perfect. And then a quick follow-up for Tim on billings. Could you maybe help us quantify how much was the beat in billings in this quarter was from pro services and if there's any FX impact on billings, calculated billings in the quarter?

Tim Cabral -- Chief Financial Officer

Sure, Stan. So no FX impact on billings for the quarter. And in terms of the percent of the beat that was in pro service outperformance, it was about half. It's about 50% of that billings beat this quarter came from pro services.

Stan Zlotsky -- Morgan Stanley -- Analyst

And how about -- and duration was probably a quarter or so?

Tim Cabral -- Chief Financial Officer

Duration has been the next largest. Stan, I'm sorry. Complete -- finish your question.

Stan Zlotsky -- Morgan Stanley -- Analyst

No, I just wanted to get the breakdown of the rest, the other 50%.

Tim Cabral -- Chief Financial Officer

Yes. So the other 50%, I would say two third of it was duration and the other third was better-than-expected bookings.

Stan Zlotsky -- Morgan Stanley -- Analyst

OK. Perfect. Thank you, guys.

Operator

Your next question comes from the line of Tom Roderick from Stifel. Your line is open.

Parker Lane -- Stifel Financial Corp. -- Analyst

Hi, It's actually Parker Lane in for Tom. Thanks for taking my question. You alluded there's a nice growth in the QualityOne customer base this quarter. I was wondering if you could go back, though, and discuss the extent that you've seen with some of your early adopters there and whether or not you've learned anything from those customers as far as product expansion and product road map is concerned.

Thanks.

Peter Gassner -- Founder and Chief Executive Officer

I'm sorry. Can you repeat that specific question? I couldn't catch the first part of it and I want to be accurate on it.

Parker Lane -- Stifel Financial Corp. -- Analyst

I was just mentioning that you have some nice sizable customers outside of life sciences. And I'm wondering in your discussions with them, being this is a new market, have there been any new product areas that you consider that are sort of adjacent to the QualityOne market that you could address over time.

Peter Gassner -- Founder and Chief Executive Officer

Yes. So we are having good success with QualityOne outside of life sciences and then some large customers particularly in the CPG and the chemicals area. And when we do that, we always get exposed to different product opportunities. And when a customer starts working with our platform, "Hey, we're working with you here, Veeva.

We have a need over on this site, or over on that site, something adjacent." So that's really been going on for the past year or so. We haven't locked in on any new product area that we're ready to talk about, but there's certainly a lot of adjacent opportunity in it. The trick is to really figure out when to jump into one of those and which one to jump into and we're not ready to talk about any specifics there just yet.

Parker Lane -- Stifel Financial Corp. -- Analyst

Got it. And then on the clinical front, you also referenced some nice customer wins in EDC and CTMS, how effective -- you're doing pretty well there. Can you tell us what the appetite is for a full clinical suite that you're seeing in the market and what sort of momentum you had in replacing some of the existing competitors out there that have been deeply embedded in this market for some time?

Matt Wallach -- Co-Founder and President

Thanks, Parker. So yes, I mean, we're definitely seeing an increased appetite for going all-in with clinical. The really logical ones are eTMF, Study Startup and CTMS. Those tend to go together.

It's similar people, similar budgets and very tight integration between the different pieces. And so there's lots of examples of companies expanding. In fact, one specific example, as I think almost every CTMS customer is an eTMF customer also. All of the Study Startup customers are eTMF customers.

So those things go together and I think that as the CTMS product matures, it's going to -- and that is as mature as the eTMF and Study Startup, that's an integrated suite that's never been possible before. I think EDC, we still see a lot of connections, and sometimes it's the same people. Sometimes it's different people, but people see it as their clinical IT landscape, and they understand that one platform is better than two or three or five. Competitively, we see the same companies that we always saw in each of these areas.

Some are strong in eTMF. Some are strong in EDC. Some are strong in CTMS. We don't have a competitor that is strong in all of them.

So not only do we try to have an integrated suite but we also are trying to create a very best product in each one of those areas. And so we see a lot of momentum across clinical U.S., Europe and building in Japan as well.

Parker Lane -- Stifel Financial Corp. -- Analyst

Excellent. Thank you, guys.

Operator

Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Brian Peterson -- Raymond James -- Analyst

Thanks, guys. I'm sorry about that. Apparently, this telephone is bamboozling me here. , but -- so I wanted to hit on eTMF.

It hasn't really come up yet, but I think you mentioned that this was the second best quarter ever for eTMF, so I just want to be clear. Is that a new business dynamic? Or is that revenue? Maybe expand a little bit on what drove that.

Peter Gassner -- Founder and Chief Executive Officer

Thanks, Brian. And by the way, congratulations. That's the first time that we've heard the word bamboozle on our earnings call. So that's really good.

Well, now to the more serious question of eTMF. Now the dynamics there, it's relatively big. This is something eTMF -- even though we've been in this market for quite a while and we have a lot of customers, they're large customers. It goes all the way down to quite small customers.

They're pharma, biotech, med device, CRO customers. They all need eTMF. And some of these implementations are long. So it's something sometimes a deal that we have entered into, maybe two years ago, there's still some revenue increase now as the customer would complete the rollout of an enterprise license agreement or maybe they would just add incrementally more studies.

So there's really no change in the dynamic. It's just to point out that this is really a large market and it plays out over multiple years and over multiple geographies and customer segments.

Brian Peterson -- Raymond James -- Analyst

Got it. Thanks for that. And maybe one for Tim. Just, you kind of outlined the early adopter phase that you have with Nitro and how that's going to take -- play out over the next few years.

We have a lot of products that are in this early adopter phase now. So when should we think about those transitioning out of that phase? And is there any particular time period that we should really see some accelerated sales and marketing investments? Thanks, guys.

Tim Cabral -- Chief Financial Officer

Yes. It's a good question, Brian, in that we have announced a number of new products over the last 18 months, and they're in that early adopter stage, or in the case of Nitro, as you mentioned specifically, we have it in Japan generally available and it will be later on this year that it will be in the United States. So the early adopter stage is in front of us. I think as we look to the subscription revenue guidance that we gave through 2020, the majority -- the vast majority of where that is coming from was from the core products in Vault and in the Commercial Cloud that we had up into that time period, although we will see some contribution from some of the newer initiatives like QMS, like outside life sciences.

I think those will really start to contribute materially to revenue after that 2020 time frame is what I would say. So again, short strokes, there will be some contribution revenue between now and 2020 with more of the material revenue contribution outside -- past that time frame.

Brian Peterson -- Raymond James -- Analyst

Understood. Thanks, Tim.

Operator

Your next question comes from the line of Ben Rose from Battle Road Research. Your line is open.

Ben Rose -- Battle Road Research -- Analyst

Good afternoon. I have a couple of questions. First for Tim. I think this is the first time we've seen the unbilled receivables account on the balance sheet.

I was curious to know if this is traceable to a particular customer or product set and whether we should expect to see the existence of this account going forward.

Tim Cabral -- Chief Financial Officer

Yes. Ben, the real driver here is the -- with the adoption of 606 and the way that we are treating the revenue recognition of some of our multi-year arrangements, we have identified that account to articulate what the impact is from those particular accounts and how we are accelerating revenue in front of billings, in some cases. Now what you'll see over time, Ben, just a little bit more detail there, typically, that account was within accounts receivable. And what that account would've had as a subaccount was we bill services revenue after we take the revenue.

So when we take a month of revenue like, let's say, April, we will take the revenue in Q1 but we'll bill it in Q2. So that also is part of the unbilled receivables that you'll see going forward. So a month of services, billing, and revenue.

Ben Rose -- Battle Road Research -- Analyst

OK. That's helpful. And then for Peter, with regard to Nitro, is it logical to assume that your product road map would include the application of Nitro to various parts of the development cloud?

Peter Gassner -- Founder and Chief Executive Officer

Yes. Well, at this time, we're focusing Nitro in the commercial area, in Nitro and then we'll follow that on with an AI engine over time targeted to late 2019, late next year. So that's our focus right now. And that type of technology is very applicable to the development cloud but we made no commitment to do that.

At this time, we're really going to focus on our early adopter success and getting the technology right. So the type of data warehouse application for the development cloud, that's something we'll always be evaluating but we made no decisions on that at this time.

Ben Rose -- Battle Road Research -- Analyst

OK. Thank you very much.

Peter Gassner -- Founder and Chief Executive Officer

Thank you.

Operator

There are no further questions at this time. I will turn the call back over to Mr. Peter Gassner for closing remarks.

Peter Gassner -- Founder and Chief Executive Officer

Thanks for your time today, everyone, and thanks again to the Veeva team. We appreciate all the outstanding work, execution and focus on product excellence allows us to deliver for our customers. So have a great evening, everyone. Thank you.

Operator

[Operator signoff]

Duration: 50 minutes

Call Participants:

Rick Lund -- Head of Investor Relations

Peter Gassner -- Founder and Chief Executive Officer

Tim Cabral -- Chief Financial Officer

Rishi Jaluria -- D.A. Davidson -- Analyst

Pat Walravens -- JMP Securities -- Analyst

Matt Wallach -- Co-Founder and President

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Daniel Greenfield -- Evercore ISI -- Analyst

Scott Berg -- Needham & Company -- Analysts

Sterling Auty -- J.P.Morgan -- Analyst

David Hynes -- Canaccord Genuity -- Analyst

Bhavan Suri -- William Blair & Company -- Analyst

Stan Zlotsky -- Morgan Stanley -- Analyst

Parker Lane -- Stifel Financial Corp. -- Analyst

Brian Peterson -- Raymond James -- Analyst

Ben Rose -- Battle Road Research -- Analyst

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