Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Veeva Systems Inc (NYSE:VEEV)
Q2 2020 Earnings Call
Aug 27, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, my name is Chantal, and I'll be your conference operator today. At this time, I would like to welcome everyone to Veeva's Fiscal 2020 Second Quarter Results Conference Call. [Operator Instructions]

Thank you, Rick Lund Investor Relations Director. You may begin your conference.

Rick Lund -- Head of Investor Relations

Good afternoon, and welcome to Veeva's fiscal 2020 second quarter earnings call for the quarter ended July 31 2019. With me on today's call are Peter Gassner, our Chief Executive Officer, Paul Shawah, SVP of Commercial Cloud and Tim Cabral, our Chief Financial Officer.

During the course of this conference call, we will make forward-looking statements regarding trends, our strategies and the anticipated performance of the business. These forward-looking statements will be based on management's current views and expectations, and are subject to various risks and uncertainties. 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-Q, which is available on the Company's website at www.veeva.com under the Investors section, and on the SEC's website at www.sec.gov.

Forward-looking statements made during the call are being made as of today, August 27, 2019. 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 will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

On the call we 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.

Finally, I'd like to welcome you to join us at our Annual Analyst and Investor Day on October 2, in San Francisco. If you haven't received an invite and would like to attend, please feel free to reach out via email at the address ir@veeva.com. If you can't join in person the event will be webcast with both the live and archived versions available on our Investor Relations website.

And with that, thank you for joining us, and I will turn it over to Peter.

Peter Gassner -- Founder, Chief Executive Officer

Thank you, Rick. And thanks to everyone for joining us today. Q2 was another strong quarter with the results, above our guidance. Total revenue was $267 million, up 27% year-over-year. Subscription revenue grew 28% year-over-year and our non-GAAP operating margin was 39%. Veeva has now passed a $1 billion revenue run rate. This is a year and a half ahead of the target we first laid out in 2015. With customer success as our driving force we were able to exceed our goals through exceptional focus and execution. Thank you and congratulations to the Veeva team.

Today we also announced our CFO, Tim Cabral is retiring next year after a 30-year career and 10 years at Veeva. A search for his replacement is under way and Tim is staying at Veeva through the hiring and on boarding of our new CFO to ensure a smooth transition. I'd like to express our appreciation and thanks to Tim. He is an exceptional leader, having helped guide Veeva from a start-up to our current scale. He also built the strong team. Working with Tim at Veeva and at PeopleSoft before that has been a true partnership that I value deeply. Now turning to the details of the quarter. Strong momentum in Commercial Cloud contributed to our outperformance in Q2. In core CRM we continue to extend our leadership position with new SMB customers and additional enterprise expansions. And customers continue to adopt more CRM add-ons this happens on a product-by-product and region-by-region basis.

Let me give a couple of examples, Veeva CRM engaged had one of its strongest quarters as four top 20 pharmas expanded their use of engaged to new field teams. Customers are attracted by the deep functionality and multi-platform supportive engaged and the very tight integration with CRM. We also had an important design win at the top 20 pharma for events management. This customer has been using core CRM globally for many years and recently decided to expand their Veeva relationship to include events management in more than 90 countries over time. They chose Veeva because we have a deep functionality and professional services capabilities needed for a global events Management rollout. They will replace multiple custom systems and spreadsheets, leading to a more efficient and compliant global process. It's great to see this expanding relationship with a long-standing customer.

Turning to vault, we continue to have great momentum. Vault now has nearly 650 customers and as of Q2 represents more than 50% of total revenue. This is an exciting milestone. When we started Vault a number of years ago, the potential was clear to me. And as I look ahead it's also clear that we are in the early days of Vault. This quarter, a newly independent top 20 medical device company, standardize on Vault across the organization, including clinical, quality, regulatory and commercial. With the ability to start from a clean slate they chose vault because it's the only solution to provide best in class application suites on a single modern cloud platform.

Our customer success focus and commitment to the medical device industry was also key. In clinical, they will use Veeva eTMF, CTMS and CDMS. Let's focus in on CDMS. They chose Veeva's CDMS over their incumbent system for a few reasons. First, they were looking toward the future and long-term partnership so they liked our pace of innovation. They've seen Veeva's CDMS evolved rapidly over the past 12 months and are excited about what's ahead. They also saw that Veeva's CDMS as well suited to running all the types of studies, it can handle the complex studies, but also it's practical to use for small studies that are built on short notice. And they also won clinical data management and clinical operations all on a common platform to gain operational efficiency.

We now have a top 20 pharma, and the top 20 med device company has lighthouse customers for CDMS. These early adopter accounts are very important and their success is a major focus for the team. CTMS is also progressing well. We continue to win more deals and now have 50 customers signed in just two years since the product was released, that's amazing momentum in a highly complex area.

Our progress here speaks to the significant need in the market for a modern CTMS solution. We believe Vault CTMS is poised to be the leading solution over time. Drilling down into quality, we signed our 10th top 20 pharma for Vault quality docs, following their success with Vault PromoMats eTMF and submissions. This customer selected quality docks as part of that move away from a legacy content management platform. On the QMS side of quality, we ended the quarter with more than a 100 customers. The need for modernization is driving the move to Veeva in this area, as is the benefit of having QMS integrated with quality docs and training on the Vault platform. This is another great example of the innovation we are bringing to an underserved market.

Finally, I'd like to give an update on our efforts outside of life sciences. I'm pleased with the progress we are making within our three focus industries CPG, chemicals and cosmetics. Since announcing the new Vault claims product last quarter, we now have projects in place at three top CPG companies. We are also executing well in chemicals and cosmetics. Customer success drives our business in all industries. This quarter we had major go lives at a top 20 CPG a top 20 cosmetics company and two major go lives in chemical.

In closing, we had a great quarter. Our results reflect the customer trust we have gained through consistent innovation, focused execution and our commitment to their success.

With that, I'll turn it over to Tim.

Tim Cabral -- Chief Financial Officer

Thanks, Peter. Q2 was another quarter of solid execution across the board. Total revenue was $267 million, up from $210 million one year ago, a 27% increase. Momentum across Vault continues with Vault now representing 52% of total revenue, up from 46% in Q2 of last year. Subscription revenue grew 28% to $217 million from $170 million last year. Vault represented 48% of subscription revenue, up from 42% a year ago.

Year-over-year growth benefited from particularly strong bookings in the first half of the year and from a 190 basis points of tailwind from 606 due to the recognition of unbilled revenue from multi-year orders with ramping fees. Services revenue was nearly $50 million, up 24% from $40 million one year ago. We expect services revenue to be roughly flat sequentially in Q3.

We continue to see strong profitability in Q2, non-GAAP operating income came in about $104 million, a 39% operating margin above the high end of our guidance. This was primarily driven by outperformance on the top line. We made good progress investing in the business with a record hiring quarter approximately 180 net new employees joined Veeva in Q2, bringing our total headcount to 2,827 up from 2,376 one year ago.

Moving to the balance sheet. Deferred revenue was $329 million compared to $364 million at the end of Q1. This resulted in calculated billings for the quarter of $234 million which was ahead of our guidance of $220 million. This was a function of a strong bookings quarter outperformance in services revenue and better than expected billing duration for the new business closed in Q2. 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 $185 million in Q3, and roughly $1,135 million for the full year, which is a $15 million increase from the high end of our guidance provided last quarter. Elsewhere on the balance sheet. We exited Q2 with over $1.4 billion in cash and short-term investments up from over $1.3 billion at the end of Q1. This increase was driven by our performance in cash from operations, which came in at $100 million and included $17 million in excess tax benefit related to equity compensation. For the full year we now expect cash from operations to be $345 million to $350 million excluding this excess tax benefit. Let me conclude by sharing the outlook for Q3 and for fiscal 2020. Next quarter, we expect revenue between $274 million to $275 million. Non-GAAP operating income of $103 million to $104 million and non-GAAP net income per share of $0.54 to $0.55 based on a fully diluted share count of approximately $159 million.

For the year, we expect revenue in the range of $1,062 million to $1,065 million. We expect subscription revenue to be in the range of $871 million to $874 million and within that we now anticipate commercial cloud subscription revenue growth between 13% to 14% and vault subscription revenue growth of at least 40%. For fiscal 20, we expect non-GAAP operating income of $401 million to $404 million a margin of about 38% roughly a 100 basis point increase from our previous guidance.

Coming off of a record hiring quarter, we plan to continue investing for customer success and future growth with an aggressive hiring plan for the remainder of the year. We are now targeting non-GAAP net income per share for the year between $2.11 and $2.13 based on a fully diluted share count of approximately $159 million.

Before I wrap up, I'd like to share some additional thoughts on my retirement. As Peter mentioned, we've kicked off the search from our replacement and I will be here through the full on boarding. As I retire from an incredibly rewarding 30 years in technology, my 10 years at Veeva have been the most fulfilling of my career. It has been a privilege to be part of such a talented team and a truly great company.

The impact Veeva is having on our customers and the industry is remarkable. This is evident in our quarter's results and our outlook for the back half of the year. The opportunity ahead, along with the team's focus and consistent execution sets us up for a trajectory of long-term growth.

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] Your first question comes from Bhavan Suri with William Blair. Your line is open.

John Baker -- William Blair -- Analyst

Hey guys, this is actually John Baker on for Bhavan. I guess I just kind of wanted to start off around Nitro and Andi-adoption, what are you guys necessarily hearing from customers and how is the implementation process going on, it looks like you're now projecting cloud growth of 13% to 14% for the year, how much of this is kind of attributable to the Nitro and Andi-adoption?

Paul Chamberlain -- Director

Yeah, hi, John. This is Paul. Thanks for the question. So with regards to Nitro, we added some additional customers this quarter. Last quarter we talked a lot about some of the early customers that we had, who were on stage at our big summit event and they were talking about their implementation now they've been live for a period of time and that's going extremely well, so the product is certainly working in the early market, I would say we're feeling a little bit of headwind from some of the andi-competitive behavior from IQVIA, so some of the same behavior that they've demonstrated with network there also demonstrating with my Nitro. So we have to balance, some of the success that we're seeing with these early adopters with some of the headwinds that we're seeing as well.

I would say with Andi, we are focused on getting the product to the right level of maturity and also getting some of those early customers kind of signed up and life, this is still early market -- early days really for both Nitro and for Andi, so from a contribution standpoint it's going to take some time before their material and meaningful impact from a contribution perspective.

John Baker -- William Blair -- Analyst

Okay. Great. Thank you. And then, I guess, kind of just in general, as you look at the geopolitical environment around drug pricing and regulation. Can you kind of remind us, does this have any effect around you guys go to market here and then are you seeing, I mean what are you seeing and hearing from customers around this as well? Thank you.

Paul Chamberlain -- Director

Yeah, thanks for the follow-up. So it certainly has the potential to have an impact on how we go to market and also more importantly the types of relationships that pharma companies have with their suppliers, we haven't seen any of that yet, drug pricing is has the potential to have a very significant impact across the industry, it would affect all suppliers, Veeva being some of the same -- in that same grouping. What I would say is, we haven't seen any impact yet. I'd also say that as they have more pricing pressure and as they have more cost pressure, the balancing side of that, that may create a tailwind is the fact that companies often looked at technology to try to drive efficiency. So I think there is a little bit of a potential headwind, but there is also some opportunity for technology to drive efficiency and cost savings as well.

John Baker -- William Blair -- Analyst

Okay. Great. Thank you guys for taking my questions and congrats again on the quarter.

Paul Chamberlain -- Director

Thank you.

Operator

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

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

Great. Thanks guys for taking my question. Just one on CDMS obviously you're seeing traction there in the top 20 segment of the market, I know you've been working on features as you're kind of moving up with reference building there. Are there any features in particular you'd point to, to say well now CDMS is ready for these top 20s, and maybe we're hitting a tipping point?

Peter Gassner -- Founder, Chief Executive Officer

Good question, Brad. This is Peter. In terms of features, you can always add more features, that's for sure. Software is never done, but we're pretty well feature complete now. I would say of course, features need to be rounded out over the years. So what people would look for now it's just proven success and some are going to want to be more early adopter-ish than others. So I think we're in the normal technology adoption lifecycle and this is a critical area for life sciences, so it's not something that they're going to switch out easily right or without thought. So we're doing well in features and in fact in some cases, we're really getting out ahead of things because we're taking a fresh approach and since you asked about a product, I'm going to give you a detailed product answer, because I like that stuff.

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

Perfect [Phonetic].

Peter Gassner -- Founder, Chief Executive Officer

When clinical data management started many years ago Electronic Clinical Data Management started it was about collecting data points of the patient. Now as medicines and therapies have been come more complex is becoming more important to collect qualitative medical assessments from physicians from third parties physicians who are assessing the data points, that's been an afterthought in medical device in CDMS systems for many years and because there is no innovation in the market that just persisted now when Veeva comes out, we actually put excellent features in for that. And so in some cases, in some future areas, we're actually taking a fresh approach and leapfrogging the market, and this medical assessments is one of those areas.

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

That's great. And then one more if I may please just on commercial, you obviously raised the outlook for this year. Where would you point to in particular on the outperformance, it sounds like you've got a new customer win there, but also you're executing well on some of these add on attaches more companywide, any color you can provide on that please. Thank you.

Paul Chamberlain -- Director

Yeah, hi, this is Paul. I'll take that one. So the outperformance and commercial is driven by a couple of factors. First, CRM, we are seeing our enterprise customers expand into their regions faster than expected, so that expansion is continuing to happen and we'll continue to see a bit more of that in the enterprise side. We're also seeing strength in small and medium-sized companies. So these, I think [Phonetic] companies that are pre-commercial a lot of the net new wins here or pre-commercial companies and they're launching their first product and what they want to do is they want to launch and have the most successful launch based on modern technology. So we see a lot of success there and the other trend that's happening there is they often go in with Veeva CRM and the number of the add-ons in the initial purchase. So we see that, that is a bit of a trend that's continuing. So the -- some of the add-ons. So CRM has strength. I would also point to a few of the add-ons that are kind of outperforming what we'd expected so engage is one area where a number of enterprise customers have began global expansions on engage that will take time that will happen over months if not years, but we're seeing that trend continue where they're able to demonstrate results and build out that business case and we've also seen great performance better than expected with approved email and also for open data. And I think what's driving that is the industry trying to move to digital a bit faster as well, so we're seeing strength in both in CRM and the add-ons.

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

Great. Thank you so much, Tim. Congratulations on your move, you'll be missed.

Tim Cabral -- Chief Financial Officer

Thank you, Brad.

Operator

Your next question comes from Sandy Draper with SunTrust. Your line is open.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Thanks very much for taking my question. I guess my question is going back to the hiring side, Tim, I think you commented you had maybe the most hires of any quarter. I think I may have heard that correctly. I'm just trying to get a sense of how -- what's driving that and how much wage inflation is there, and are you competing against other players around the life sciences area? Or is it really more competing against tech people or both? Just trying to get a sense of to keep growing and selling as well on the top line, how hard is it going to be the higher to support that demand? Thanks.

Tim Cabral -- Chief Financial Officer

Yes, Sandy this is, Tim, thanks for the question and Peter, I don't know if you want to add anything here on the hiring side of what we're seeing. I think a couple of things have contributed to what was our strongest hiring quarter-to-date you identified that correctly, Sandy. Number one, we have a very strong university hiring program, we call generation Veeva and as you can imagine, typically you will see in Q2 and sometimes it's still a little bit into Q3, but mostly in Q2 is more hiring a lot of folks into that program both on the engineering side, and the consulting side and that has been a focus of ours over the last couple of years as our thesis is we really want to continue to grow Industry Cloud Expertise and we can do that from the University folks as they grow in the company here at Veeva.

Secondly, and this may get to your wage inflation question as well Sandy, well we've done a very nice job I think is we've opened up new hiring markets for us or focused more of our energy on newer hiring market. So obviously Pleasanton in a Greater Bay Area is a very strong market for us and we continue to focus here, but we've also over the last couple of years, really focused on Toronto in Columbus, as other areas where we're finding both products people, some customer service people and some back office people as well. So I think the expanding the number of markets, we can hire from has also helped in our execution around hiring. Peter, I don't know if you had any additional color there.

Peter Gassner -- Founder, Chief Executive Officer

Tim summed it up, well. It's about expanding locations you have to do that and then in terms of competition, it depends on the segment, whether it's fresh out of college, OK, that's tech companies and consulting companies. In engineering you're competing against tech companies in the field for general sales positions you may compete against all tech companies and then in some of our domain specific areas like strategy, yes, they were competing against other life sciences specific company, so it's always the same, right, you have to compete -- if you have the best team that's where you get the best company.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Great. That's really helpful. Thanks and congrats on another great quarter.

Peter Gassner -- Founder, Chief Executive Officer

Thank you.

Tim Cabral -- Chief Financial Officer

Thanks, Sandy.

Operator

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

Kirk Materne -- Evercore ISI -- Analyst

Thanks very much. Peter, I was just wondering if you could talk a little bit about the outside of Life Sciences, are they I'll ask business just in terms of referenceability and kind of where you are there and what your thoughts might be around sort of upping the sales motion, if you are getting closer to referenceability. Thanks.

Peter Gassner -- Founder, Chief Executive Officer

Yeah, we're happy with our progress outside of life science, it's still early days so our concentration really now is in some of these large customers we have rounding out the products. We are getting more referenceable over the time and you won't see a hockey stick type of effect, but more of a have an even acceleration of the market and that's what we're seeing.

Kirk Materne -- Evercore ISI -- Analyst

Okay. That's helpful. And Tim, maybe just on your 606 comments. Is there anything left on that front in terms of sort of ramp of deals that we should be thinking about, I guess exiting this year and the next year.

Tim Cabral -- Chief Financial Officer

Yes, Krik, thanks for the question. In terms of 606 as you know, we get a little bit of a revenue uptick, given the new revenue guidance around unbilled revenue of multi-year deals that have ramping fees and that are non-cancelable. So really at the end of the day it boils down to the mix of those types of deals, and there are a number of -- we're in the early days of Vault, which is where we see these and so there is certainly an opportunity where those types of deals and/or the mix of those deals either continues in a steady way or grows or contract, so it's not something we specifically forecast.

And as I think, I said last quarter, I'll say it again here as we see the actual impact of that be material to the results. As I've done in the last two quarters. I'll make sure I give that transparency and color. We think about it internally sort of like FX in that way. When it's material companies like us, will talk about it.

Kirk Materne -- Evercore ISI -- Analyst

Super. Thanks very much. And Tim, congrats on a great run.

Tim Cabral -- Chief Financial Officer

Thanks, Kirk.

Operator

Your next question comes from Ken Wong with Guggenheim Securities. Your line is open.

Ken Wong -- Guggenheim Securities -- Analyst

Great. Thanks for taking my question. It's obviously a couple of good CDMS wins these last two quarters. Peter, how do you see the recent acquisition of Medidata impacting the CDMS market? See that as a general kind of a tailwind or headwind for you guys?

Peter Gassner -- Founder, Chief Executive Officer

Well, the acquisition of Medidata by Dassault certainly, it caused a lot of questions about from customers, which is normal. And some of those questions were -- they would ask customers would ask of us. And -- but we really haven't seen any change in the market when we look at CDMS, it's really about building the best product, getting customers, giving them live and happy and successful and really innovating and the market. So we have really seen no effect of the acquisition so far. How it will play out in the future. That's of course unknown and that's not where we will focus, but we're really focusing in on our customers now.

Ken Wong -- Guggenheim Securities -- Analyst

Any sense if that might give you guys maybe a bigger window to reach out to customers? And there's -- I guess is it sort of a change in terms of who they have to deal with now? Or has that also been fairly neutral at this stage?

Peter Gassner -- Founder, Chief Executive Officer

Always will cause a customer to consider that's probably one thing they will consider as they are evaluating a system. But it's not something that we've seen materially affect any of our business or affect any type of competitive dynamics at this time.

Ken Wong -- Guggenheim Securities -- Analyst

Yes. Got it. And then if I can squeeze one in for Tim, earlier you touched on duration helping billings, is -- can you talk about what's causing us and should we expect this trend to continue.

Tim Cabral -- Chief Financial Officer

Hi, Ken. Thanks for the question. So that was -- of the billings beat, that was a smaller component of the billings beat. Probably roughly half of the billings be that we talked about was stronger bookings in the quarter. As it relates to duration it really becomes a mix of the deals that we closed in any particular quarter and it can change based upon when the customers renewal date is and depending upon the length of the add-on order. It could depend upon whether the customers that we're closing in a particular quarter or more quarterly billers versus annual. So there is a lot of different factors which play in there. Ken and it really depends on the mix as to whether or not that creates a little bit of uptick in billings. Now you can imagine with the complexity there, we're likely on the conservative side as we think about forecasting for that particular component. But as I said, that was not the biggest part of the beat in the billings area.

Ken Wong -- Guggenheim Securities -- Analyst

Got it. Great. Thanks a lot and congrats on your well deserved extended vacation.

Tim Cabral -- Chief Financial Officer

Thanks, Ken.

Operator

Your next question comes from James Rutherford with Stephens, Inc. Your line is open.

James Rutherford -- Stephens Inc -- Analyst

Yeah, thanks for taking the questions and congrats on the quarter. A couple from me. First on artificial intelligence, we observed a rise in your innovation around AI of course we had -- Andi and then AI for PromoMats and then recently we launched Safety.AI. So the question is, is it fair to say that you all would just apply AI to nearly every aspect of Commercial and Vault and, I guess, OLS download as well. And the second part of that question is, is AI kind of a meaningful TAM expander or these just mostly feature additions that you're kind of continue to use to differentiate the product. So a little help on the context for AI.

Peter Gassner -- Founder, Chief Executive Officer

Okay. James. AI it's a long-term trend, I remember when I was getting my computer science degree in the late '80s is the early days of AI and its continued and it's getting more useful and impressive as they go on. Now in terms of Veeva you will see AI applications from us different applications that we can make now because the AI capabilities are there that we couldn't make before. So you mentioned safety that AI and Andi those are fundamentally AI applications brand new AI brand new applications for us. And then we will add AI into many areas of our existing applications to the automatic claims linking and the PromoMats the approved notes for recognizing our tech sentiment in CRM. So it will, I think -- what increases our TAM is when we make more applications. AI over the years is going to allow us to make more applications. That's probably the best way to think about it and it's going to be a gradual expansion AI grows over the years the capabilities it's not a on and off switch.

James Rutherford -- Stephens Inc -- Analyst

Okay. Helpful. Thank you for that. And then Paul, one for you, if I may. We took note of the new soft partnership announced recently. I'm just curious if you can help us understand how that fits with your Nitro strategy, MuleSoft obviously being a leader on iPaaS and API management. So should I think of Mule as just kind of a way to grease the skid and help life science companies get that data into Nitro more quickly and easily just some thoughts around how that fits from a technology perspective. Thank you.

Paul Chamberlain -- Director

Yeah. So we actually think about new soft a little bit differently in the focus for the announcement that we had with Salesforce around MuleSoft was focused on our Vault applications. So there's different mechanisms on getting Nitro data into Nitro that, think of that separately as our customers are expanding their vault footprint and getting more and more vault applications and really kind of these mission critical areas. A number of applications or systems that they need to integrate to becomes higher and higher. So what we look at, we think of the new soft connector as a way to make those integrations -- our seamless -- more seamless faster easier and easier for customers to support and maintain over time. So think about MuleSoft more specifically as it relates to Vault applications, which is the kind of the focus of that integration today.

James Rutherford -- Stephens Inc -- Analyst

Okay. Thanks for that color. Nice quarter.

Tim Cabral -- Chief Financial Officer

Thank you.

Peter Gassner -- Founder, Chief Executive Officer

Thank you.

Operator

Your next question comes from Rishi Jaluria with D.A. Davidson. Your line is open.

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

Hi guys, thanks for taking my questions. Tim, congrats on all your achievements with Veeva over the past 10 years. They've been a pleasure. I think you set a great standard for other SaaS companies CFOs to follow. So on that, I would love to hear. What are you looking for Andi replacement to kind of ensure that it's going to be a very seamless transition from you to whoever takes over your seat?

Tim Cabral -- Chief Financial Officer

Yeah. Rishi first, thanks for the kind words. I think as Peter and the Board and I look for the key attributes of our replacement, if someone who as I think I've tried to build is can be a really good business partner to Peter to the leaders within the company and can connect to the Board as well. Someone who has some level of domain expertise around SaaS would be very helpful as well, because as you talked about the pattern recognition of what are the key metrics and the things that make sense to a SaaS business. Again it doesn't have to be someone who has been in SaaS for 20 years but some familiarity would be very helpful.

I am more of a finance person, our Chief Accounting Officer Michel is much more of an accountant, so maybe we fit a more like me where it's more of a finance background as opposed to an accounting background, but I wouldn't rule out either of those. But I think I would lean in that direction. And then really someone who has the level of passion that I think is required for this job and really wants to take on what I think is unbelievable opportunity had an unbelievably impactful company like Veeva. So I don't know if that was a resume and description, but there are some of my thoughts.

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

Great. That's really helpful, Tim. And then Peter one for you. I am not mistaken, I believe so. I'm showing you're joins next month. I would love to kind of hear your perspective on what you expect or what we should hope or out of Tom joining, and maybe it's first 90 days at Veeva, especially given that the R&D summit is coming out in the next week and a half, two weeks. Thanks.

Paul Chamberlain -- Director

Yeah, Tom, is joining next month, and he is quite accomplished veteran brings a lot of customer relationships and just knowledge of operating at scale teams of thousands of people and revenues into the billions that had Accenture. So what Tom will focus on for us is in the sales area as President and CEO. The field -- excuse me -- not only the sales of the filed area. The customer success, the sales, the services, the strategy area. Tom will be based on the East Coast as well. Philadelphia, so he will cover that region and Tom will be one of the key members of the management team and partnering with me. Tom strength again is in deep understanding of life sciences execution at scale and executive relationships and team building and that's what I expect. Tom, I'll do for us here.

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

Great. That's helpful. Thanks, Peter. Thanks, Tim.

Tim Cabral -- Chief Financial Officer

Thanks, Rishi.

Operator

Your next question comes from David Hynes with Canaccord Genuity. Your line is open.

David Hynes -- Canaccord Genuity -- Analyst

Hey, thanks guys. So I wanted to follow up on the CDMS line of questioning. As I think about purchase decision considerations say for a top 20, is there a competitive advantage to sticking with an incumbent where there may be a data history? Or is each trial such a unique entity that in theory, it would be easier to cut over to a new vendor?

Peter Gassner -- Founder, Chief Executive Officer

Good question. Each trial is independent in its data and the long-term repository of the data meaning, where does the day to go after the trial is finished. That's an independent system that's not normally collected -- connected, it's not normally the same as the clinical data management system. It's enormously of -- you can think about more of a data repository or a data warehouse that's separate. So that's not an impediment what is hard for people when they were considering switching is your clinical data management system has to be integrated with the other systems. If you bring in a new clinical data management system that said there integrations to write and other testing and validation to do because for a while for a considerable period of time, you'll be running multiple systems. So that's attack, so that's why this type of change is not, is not considered lightly. Did that answer your question?

David Hynes -- Canaccord Genuity -- Analyst

Yes, you now that's perfect. That makes perfect sense. And then maybe kind of a bigger picture question. As we think about product roadmap for Vault maybe over a three year period or so, should we expect new efforts to predominantly stay within Life Sciences or are we getting to the point where the suites pretty built out, so maybe we start to see more in new verticals and I want to be clear, I'm not asking about sales execution opportunity. I know there is still a huge runway in life sciences but more just kind of how the product evolves?

Tim Cabral -- Chief Financial Officer

How the product evolves. Well, there is a history, I think of honestly, what I believe is there is a history of underestimating the potential inside of life sciences and I saw that in 2010, I saw that in 2015 and now as we approach 2020, I also see that. So I think a lot of our expansion can still come inside of life sciences, I think we're actually relatively early in the Industry Cloud for life sciences as surprising is that would seem, now some proof of that is in, OK look, the clinical data management area for us is brand new, the safety area is brand new, but there are more things that can be done in life sciences, especially as we accumulate more and more data about life sciences.

So we will certainly -- we are doing well outside of life sciences. But I wouldn't underestimate inside of life sciences. And I would say also just in general, our core platform of Veeva Vault that's in it's very early days. I know how these things play out, when you really invest in the platform that's something, actually that you monetize we're talking over 20, 30 years. And Veeva, you got to remember is only 12 years old. Yes. But Vault is only eight years old. So it's still very early days.

David Hynes -- Canaccord Genuity -- Analyst

Yeah. Okay, very good. That's helpful. Thank you and Tim congrats and good luck.

Tim Cabral -- Chief Financial Officer

Thank you, DJ.

Operator

Your next question comes from Brent Bracelin with KeyBanc Capital Markets. Your line is open.

Brent Bracelin -- KeyBanc Capital Markets -- Analyst

Thank you. I guess one for Peter and one follow-up for Tim, if I could. Peter, it's clearly been an incredible first half for Veeva milestone quarter here crossing over $1 billion run rate. I think there's few companies that they are able to do this with the accelerating growth across two major product categories, so things are clearly humming right now. My question is more about next year and as you look at the product pipeline, customer opportunity, what are you most excited about looking out in the next year given things seem to be going really well right now. But what are you most excited about next year. And then one quick follow-up for Tim.

Peter Gassner -- Founder, Chief Executive Officer

Oh, gosh, next year, it's just has a lot of excitement. We are bringing in new people the company at an amazing pace. I was just in Denver, Friday and let's see Friday -- Thursday night, Friday and Saturday with close to 250 what we call it generation Veeva people, these are people that are two years or less out of college and they're in consulting and R&D and commercial and engineering in Pleasanton and Toronto. I'm just excited about the workforce we're developing here, so that's on one spectrum.

On the other spectrum, we are bringing in people like Tom Schwenger and we're growing that middle area, so I'm -- that's overall what I'm excited about. I am excited about close to 3,000 people, all with a common culture and really learning how to hum together. Now if you get into the product area, I'm really excited about clinical data management and safety, there is new areas that are just super ride for innovation and very early and I'm excited about a resurgence in what we can do in commercial cloud and some innovation we can bring in there.

So I'm excited about every year just consequent it's going to be great. And it really piqued my interest like, OK, yes, that you got to get after that. I think it's going to be a great year. I don't have any financial guidance, do I Tim.

Tim Cabral -- Chief Financial Officer

No, we cannot give a financial guidance.

Peter Gassner -- Founder, Chief Executive Officer

But overall, you know it's -- I'm really excited about the mojo of the company and that's created by the people coming into the company in the common culture where people can work together and enjoy at that greater scale. It's a beautiful thing.

Brent Bracelin -- KeyBanc Capital Markets -- Analyst

Absolutely. Tim, just again to extend my congratulations on the retirement here certainly well-earned great run and you will be missed just drilling on down into the commercial cloud growth, I mean we're seeing here now, the second quarter of accelerating growth there, what's driving the improving visibility you guided up for the full year here a little bit on the growth profile there, are these engage and event management rollout big enough to kind of drive a sustained improvement in growth there or should we think about these things is kind of a couple of quarter rollouts that kind of will then kind of roll off. Help me understand the improvement on the commercial cloud gross side?

Tim Cabral -- Chief Financial Officer

Sure. And Brent, thanks for the question and thanks for the kind words. Yes, we're very pleased with what we're seeing in commercial cloud, I would say that the recent uptick in growth that we've seen in the first half of this year, which is, you've seen it impact our guidance is mainly due to particularly strong bookings in the last few quarters. And I would echo what Paul said earlier, in terms of where we're seeing the strength from a bookings perspective, it's in CRM enterprise expansions that are growing faster than we had anticipated, it's in SMB wins that are better than we had anticipated.

And as Paul said, we are seeing some particular strength in some of the areas for -- some of the add-on areas. Brent, I should say, namely engage which Peter talked about approved email and open data. So I think that's what we're seeing particularly strong bookings in the last three quarters, which is really driving the uptick in revenue. And as you remember, we've always characterized, this is a steady growth business over time, even given this performance that view hasn't changed in our minds.

Brent Bracelin -- KeyBanc Capital Markets -- Analyst

Got it. Helpful color. Thank you.

Operator

Your next question comes from Karl Keirstead with Deutsche Bank. Your line is open.

Karl Keirstead -- Deutsche Bank -- Analyst

Thank you. I've got two fairly prosaic numbers questions for Tim. So, Tim, maybe I missed it, but did you update the full year billings guide. I think on the last quarter of $1.12 billion and if I recall you suggested that 41% to 42% of billings might drop in the fourth quarter. Just want to make sure I didn't miss that.

Tim Cabral -- Chief Financial Officer

Yes, Karl. Thanks for the question. The updated billings guide for the year was $1.135 billion, so an increase of $15 million over last quarter and that we saw that in part being driven by the out performance in Q2.

Karl Keirstead -- Deutsche Bank -- Analyst

Got it. Okay. Thanks for that. So, I missed that. And then the second question was on your operating cash flow guidance Tim, which was for the full year, ex the tax benefits, a little bit above our estimate and I calculate first half operating cash flow growth of the super strong 40% in the first half, so congrats on that performance and I'm just wondering what it's from, is it just a function of the operating margin outperformance flowing into the operating cash flow line or is there a little something extra. Thank you.

Tim Cabral -- Chief Financial Officer

Yeah. So if you exclude the excess tax benefit, Karl. Then you have the answer. Correct. It's, really the operating income performance, which as you have seen is growing at a faster clip than our top line revenue and that's contributing to the cash flow. And I guess I would be remiss for not calling out my team as well who have done a phenomenal job with the help of the field team and certainly the help of the customer success that we've driven over time to really have another strong collections quarter and really have an amazing collections first half, so. But you're right, it's being really driven off the operating income. And when you add in the excess tax benefit that is even a higher growth in terms of operating cash flow year-over-year than operating income.

Karl Keirstead -- Deutsche Bank -- Analyst

Got it. Okay, Tim. Thank you.

Operator

Your next question comes from Chris Merwin with Goldman Sachs. Your line is open.

Chris Merwin -- Goldman Sachs -- Analyst

Okay. Thanks a lot for taking my question. Just as it relates to quality one, I was wondering if there is any update to the revenue run rate there and then maybe at a product level. Can you just talk a bit more about the traction you're seeing with the newer claims product. I think you might have mentioned some strength and CMG, but just curious, what types of customers are taking that product so far. Thanks.

Peter Gassner -- Founder, Chief Executive Officer

In terms of the claims product. We have our early adopters there, the product is very, very early and they're all in the consumer packaged goods, which is where claims is generally going to be targeted and it's going well, but early with that we're implementing with the first customers iterating the product. In terms of revenue, we're happy with the progress outside of life sciences, but that's not something that we break out at this time, and will give you further updates as we have them.

Chris Merwin -- Goldman Sachs -- Analyst

Okay. Great. Thanks. Then just one follow-up on 8-figure customers. It sounded like last quarter, that was going really well. Just curious if there is any update there and you're still on track to reach that, I think, target 20 by the end of the fiscal year.

Tim Cabral -- Chief Financial Officer

Yeah, Chris, this is Tim. So I think you've characterized it correctly. We are continuing to build deeper and larger relationships with our customers and that's been a function of two things. I think one, well three probably one our customer success the innovation of our products and the expanding product portfolio, which gives us the opportunity to make a larger impact or create a larger impact for our customers. We typically have updated that number in our Analyst Day. So why don't I hold off and we'll probably give you an update on the -- on that in the Analyst Day, you remember that was part of the recipe to get to the billion revenue run rate, which we did eclipse this quarter. And Peter mentioned that in his quote, I mean, we're very proud and excited about that milestone and the team has done a phenomenal job of executing over the last five years -- four years since we gave that target.

Chris Merwin -- Goldman Sachs -- Analyst

Thanks a lot Tim, and all the best in retirement.

Tim Cabral -- Chief Financial Officer

Thank you.

Operator

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

Parker Lane -- Stifel -- Analyst

It's actually Parker Lane in for Tom. Thanks for taking my question. So one area we haven't heard as much about involved recently is part of that. So just wondering if you could talk about what remaining runway you see in here just a customer base for PromoMats adoption? And any recent changes you made to that product to make it more appealing to the market? Thanks.

Peter Gassner -- Founder, Chief Executive Officer

PromoMats is going very well. It's certainly the leader in its market segment, we're happy with the uptake. We still have some zinc migrations to go zinc -- we still have some zinc customers and that will be supported until the end of next year until the end of 2020. So there are some migrations in cycle and usually when that happens there is some growth in that because PromoMats has some capabilities that are not there and zinc, so it tends to be extended usage. We continue to add customers especially in the SMB market, as new customers look to commercialize that happens and one of the things we are, I guess in two things we're quite excited about. One is the auto claims linking so that I think it's going to be a real boost for our customers. That's not a new revenue opportunity for Veeva. But that's really a customer success opportunity for the customers in the industry.

And on a related area in what we call the commercial Vault is the MedComms application. We're seeing good for medical inquiries and managing medical content. So, were you seeing good uptake there and we've recently added quite a few features there that we can think expand the usage. So we're really happy about how PromoMats is doing and overall how the Zinc acquisition worked out, it worked out very well for us and our customers.

Parker Lane -- Stifel -- Analyst

Got it. And then multiple people have referenced the strength and engage this quarter. Just wondering if that's a factor of increased demand from the market or is had there been specific features that have finally come out that people have been looking for and being more receptive to really spur that growth and double the customer count over last year?

Peter Gassner -- Founder, Chief Executive Officer

Yeah, I'll take that one on engage. So I would say it's really two things. So one is, this is a different way of going to market. Let's say -- think of an industry that's been so focused on meeting in person and now you give them the ability to do something remotely. So there's been a lot of change in management. So, I think what we're seeing here is over the last couple of years, a lot of customers trying and learning and figuring out how it works and how customers are going to respond and what works well and what's some of those best practices are and they have since learned enough to build that business case and increase the demand. So we're seeing demand from different markets across the globe, who are -- who want to drive the adoption of that. So I think there is a learning in change management component. I think that's largely that's happening and that's happening relatively quickly. It's just a natural part of the life cycle of a new product like this.

And then I would say the other thing that's driving it is, just the shift in our customers' mindset to get to digital faster to evolve, to put in place the infrastructure to support their selling models of the future, all of our customers are in some respect talking about how, what their future selling model is going to look like, in digital is becoming a bigger and bigger piece of that and what we're trying to do is make sure that we enable a lot of that shift in the market with a lot of innovation. So, engage is one of the products that's driving us.

Parker Lane -- Stifel -- Analyst

Got it. Thank you.

Operator

Ladies and gentlemen, we have reached the end of the allotted time for questions-and-answers. Our final question will come from Pat Walravens with JMP Securities. Your line is open.

Joey Marincek -- JMP Securities -- Analyst

It's Joey on for Pat. Congrats on the quarter. And thank you for taking our question. Just going off to product questions, we were wondering about any new product initiatives you may have in the pipeline, particularly regarding Vault. Thank you.

Peter Gassner -- Founder, Chief Executive Officer

In terms of new product initiatives, there's lot of things there is adding on to existing products, and that's going all the time. You got to refine them adding new features and functions keeping up with the regulations. So that's the bulk -- and you're doing integrations between our suites. So that's the bulk of things going on. In terms of brand new products, we're always have ideas about that and always thinking about that, but nothing we could announce at this time.

Joey Marincek -- JMP Securities -- Analyst

Thank you.

Operator

I will now turn the call back over to Peter for closing remarks.

Peter Gassner -- Founder, Chief Executive Officer

Thank you, operator. I would like to thank everyone for joining us today and we look forward to seeing many of you at our Analyst Day in San Francisco on October 2. And a special thanks to the Veeva team for your effort and teamwork and customers for their trust and support. Thank you.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Rick Lund -- Head of Investor Relations

Peter Gassner -- Founder, Chief Executive Officer

Tim Cabral -- Chief Financial Officer

Paul Chamberlain -- Director

John Baker -- William Blair -- Analyst

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

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Kirk Materne -- Evercore ISI -- Analyst

Ken Wong -- Guggenheim Securities -- Analyst

James Rutherford -- Stephens Inc -- Analyst

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

David Hynes -- Canaccord Genuity -- Analyst

Brent Bracelin -- KeyBanc Capital Markets -- Analyst

Karl Keirstead -- Deutsche Bank -- Analyst

Chris Merwin -- Goldman Sachs -- Analyst

Parker Lane -- Stifel -- Analyst

Joey Marincek -- JMP Securities -- Analyst

More VEEV analysis

All earnings call transcripts

AlphaStreet Logo