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Veeva Systems Inc (NYSE:VEEV)
Q3 2020 Earnings Call
Nov 26, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Veeva's Fiscal 2020 Third Quarter Results Conference Call. [Operator Instructions]

I would now like to hand the conference call over to Rick Lund, Head of Investor Relations. Thank you. Please go ahead.

Rick Lund -- Head of Investor Relations

Good afternoon, and welcome to Veeva's fiscal 2020 third quarter earnings call for the quarter ended October 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 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, November 26, 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 we will not provide any further guidance or updates on our performance during the quarter, unless we do so in a public forum.

On the call, we 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 you may have also seen in our earnings press release, we intend to begin using our website as a channel of public disclosure consistent with Regulation FD. Going forward, please monitor our Investor Relations website, in addition to following our press releases, SEC filings and public conference calls and webcast.

Finally, I'd like to remind everyone that we recently closed two acquisitions. Both of those transactions closed at the beginning of the fourth quarter, and therefore did not impact our third quarter results. However, the forward-looking guidance that we provide today will include financial results for these acquired companies. Details for how we expect those acquisitions to impact the fourth quarter of this year can be found in today's earnings press release.

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

Peter Gassner -- Founder, Chief Executive Officer

Good afternoon, and thanks to everyone for joining us today.

Q3 was another strong quarter. Results came in ahead of our guidance; thanks to great execution by our teams across all areas of the business. Total revenue was $281 million, up 25% year-over-year. Subscription revenue grew 27% and our non-GAAP operating margin was 40%.

I'll share a few highlights, starting with Commercial Cloud. It was a very exciting quarter for our commercial business. We entered new areas with the acquisitions of Crossix and Physicians World. We continued our momentum with new customers and delivered success with existing customers. We furthered our leadership in core CRM, winning a number of new enterprise and SMB customers.

For example, a top 50 pharma selected us as their standard in Europe to replace IQVIA based upon their experience with IQVIA and their success with Veeva CRM in the U.S. market. Not only are we continuing to add more CRM customers, we consistently deliver on our commitment to their success. 14 small and mid-sized CRM customers went live in Q3 across U.S. and Europe. In SMB, Veeva CRM implementations typically take just four weeks to six weeks. These projects are fast and reliable because of the quality of our software and our services.

It was another great quarter for the rest of Commercial Cloud as well. We saw particular strength in Events Management and OpenData. Customers are continuing to make the switch to OpenData and I'm also pleased to see large customers expanding their use of OpenData across markets. For example, a top 50 pharma selected Veeva OpenData for the U.S. operations and two other top 50 pharmas are each in the process of rolling out OpenData to 30 countries.

We focus on customer success openness and operating as a true partner to the industry. In contrast, IQVIA uses anti-competitive tactics and its monopoly power in data to restrict customer choice. This harms the industry and ultimately harms patients. In the past quarter, we have seen IQVIA anti-competitive tactics become more extreme, especially as it relates their one key data offering. I'm pleased to report that customers are starting to stand up to IQVIA on these issues and many are considering moving to OpenData.

We are also extending Commercial Cloud with two significant acquisitions. The Crossix acquisition closed at the beginning of this month and things were off to a strong start. The team is a great cultural fit with exceptional leadership. Crossix brings depth in patient data and data science to Veeva. The operational integration is going well and we're starting to refine and execute our plans for new products and tight integration between Crossix, Veeva CRM and OpenData. Our customers are excited about their potential. I look forward to the impact that this can have on the industry over the long term.

This month we also acquired Physicians World, a leading provider of speakers bureau services for the U.S. market, which complements our events management software offering. Events is an area where speaker services and event software go hand in hand because of the complexity of logistics and compliance when organizing a physician led educational event.

Physicians World has been a strategic partner for many years. We have a long track record of success together. Now, we joined forces to make it easy for our customers to get industry leading cloud software and services from a single vendor. I'm really happy to welcome the Physicians World team to Veeva.

These acquisitions made for a very busy quarter. I want to thank our corporate development, finance, legal, IT, HR and product teams for putting in the extra hours to make this happen with speed and quality.

Shifting gears to Veeva Vault. One of the major highlights of the quarter and our year was Veeva R&D summit, which had record attendance growing more than 40% over 2,000 people. There is real transformation under way supported by Veeva Development Cloud. For the first time, the industry has a suite of applications that span the full drug development life cycle all on a single cloud platform. It was great to see so many customers showcase their successes and to work with them as they look toward the future.

Vault had another excellent quarter across enterprise and SMB. I'll touch on just a few highlights in quality and clinical. A top 20 pharma in Europe selected QualityDocs as their enterprise standard to manage quality documentation. They are long-standing commercial customer and QualityDocs is their first Veeva R&D application. They struggled with the host of legacy applications in R&D and QualityDocs is now the first step in their digital transformation.

We see a similar dynamic in clinical where companies are turning to Veeva Vault as they modernize and unify their system landscapes. For instance, a top 20 pharma customer also in Europe selected Veeva Vault Study Startup enterprisewide in Q3. We now have six top 20 pharma, standardized on study start-up to streamline trial execution.

In CDMS, We have been awarded our first large-scale Phase 3 trial with an existing top 20 pharma customer. This is a very large study it will cover more than 12,000 patients across roughly 700 sites in 32 countries. Congratulations to the CDMS team. Getting such a large study is a testament to the innovation that team is bringing to market, and their hard work making early customer successful. It's a great milestone and speaks to the maturity of our products and services. CDMS is advancing faster than we initially expected. Thanks to great partnerships with our early customers. I expect to be out of early adopter mode by the end of next year and continue our measured expansion and product innovation from there.

I'll also share a few updates on Vault outside of life sciences. Overall, I'm pleased with the team's progress to ensure customer success and product excellence. They've got their focus and are executing well against the opportunity in quality and regulatory for the chemicals, cosmetics and CPG markets. To put things in perspective, that market, our initial market outside of life sciences is roughly the same size as our CDMS market.

In October, we held our second annual customer event for CPG, chemicals and cosmetics, hosting more than 50 companies in Chicago. Also in the quarter, the team progressed well in our new areas. We signed our fourth early adopter, another CPG company, for the new Veeva claims application. And we had a major milestone in regulatory with our first 50 customer go-live.

We are now in active discussions with seven of the top 20 CPG companies. We are still in early adopting mode in this market and will be for another year or more, but this level of activity especially with large enterprises tells us that we are on the right track for long-term success.

We had a great quarter and are progressing well against our large term goals. Our focus on innovation and customer success, and our ability to execute across multiple large markets positions us well to be the strategic technology partner to life sciences and to reach our CAD3 billion revenue run rate target in 2025.

And now, I'll turn it over to Tim for a discussion of our financial performance.

Tim Cabral -- Chief Financial Officer

Thanks, Peter. Q3 was another quarter of strong financial results. Total revenue was $281 million, up from $225 million one year ago, a 25% increase. We continue to see strength in both Vault and Commercial Cloud. For Q3 of this year, Vault represented 52% of total revenue, up from 48% in Q3 of last year. Subscription revenue grew 27% to $227 million from $178 million last year. Vault contributed 49% of subscription revenue, up from 44% a year ago, indicative of both expansion of Vault usage within our existing customers and new customer additions.

Note that the recognition of unbilled revenue from multi-year orders with ramping fees was 110 basis point tailwind to year-over-year growth in the quarter. Services revenue was $54 million, up 16% from $47 million one year ago. As a reminder, Q4 has fewer billable days due to the holidays and our field kick-off, which will impact our services revenue and services gross margin.

Our non-GAAP operating income was roughly $112 million, a 40% operating margin, exceeding the high end of our guidance, top line strength mostly drove this outperformance. We achieved another record hiring quarter with 185 net new employees joining Veeva in Q3, bringing our total headcount to 3,012, up from 2,482 one year ago.

Moving to the balance sheet, deferred revenue was $251 million compared to $329 million at the end of Q2. This resulted in calculated billings of $193 million in the quarter, which was ahead of our guidance of $185 million. This outperformance was driven by a strong bookings quarter and better than expected services revenue.

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 between $500 million to $505 million in Q4 and roughly $1,175 million for the full year. Elsewhere on the balance sheet, we exited Q3 with over $1.5 billion in cash and short-term investments, up from over $1.4 billion at the end of Q2. This increase was driven by our performance in cash from operations, which came in at about $62 million and included $9 million in excess tax benefit related to equity compensation.

For the full year, we now expect cash from operations to be roughly $360 million excluding this excess tax benefit. Please note this full year number includes one quarter of estimated impact from Crossix and Physicians World, which tend to have net cash outflows in Q4.

Before going into our guidance, I'd like to provide some details around our recent acquisitions of Physicians World and Crossix. We acquired Physicians World for approximately $40 million in cash and granted retention, equity awards valued at $15 million.

Physicians World has a revenue run rate in the low $20 million, and is growing in the single digits with operating margins in the mid-single digits. Nearly all of Physicians World revenue will be reported under professional services. In addition to the previously disclosed details of the Crossix acquisition, please note that almost all of Crossix revenue will be reported under subscription revenue with the remainder [Technical Issues] over the next two to three quarters.

Lastly, these acquisitions have reduced our cash balance by about $470 million, which will be reflected in our Q4 balance sheet. We're very excited to have both of these teams joined Veeva and planned to invest in both businesses going forward. Both deals closed at the beginning of Q4 and our forward-looking guidance incorporates the impact of both acquisitions.

In today's press release, we give detailed information about our expectations for how these acquisitions will impact our financial results for the fourth quarter. But please note that we won't be breaking this out separately next year and beyond as we will be deeply integrating these new solutions into our Commercial Cloud business.

Now I'd like to share guidance for Q4 and fiscal 2020. In Q4, we expect revenue between $296 million and $299 million, and non-GAAP operating income of $100 million to $101 million. We expect the acquisitions to have a headwind of roughly 400 basis points to non-GAAP operating margin in Q4. Non-GAAP net income per share is expected to be $0.51 to $0.52 based on a fully diluted share count of approximately $159 million.

For the year, we expect total revenue in the range of $1,088 million, to $1,091 million. We anticipate subscription revenue to be in the range of $888 million to $889 million. For the full year, we now anticipate organic Commercial Cloud subscription revenue growth of about 14% and Vault subscription revenue growth of about 43%.

For fiscal '20, we expect non-GAAP operating income of $409 million to $410 million, a margin of roughly 37%. We expect the acquisitions to have a headwind of roughly 120 basis points to non-GAAP operating margin for the full year. We are now targeting non-GAAP net income per share for the year between $2.16 and $2.17 based on a fully diluted share count of approximately $158 million.

Let me wrap up by sharing our initial outlook for fiscal '21. Please note, we are still in the process of finalizing the plan and will provide our formal guidance on the Q4 earnings call. Currently, our initial outlook for total revenue is between the range of $1,380 million and $1,390 million for fiscal '21. Within this guide, we expect subscription revenue to be in the range of $1,140 million to $1,145 billion. Based on our early spending plans, we see non-GAAP operating margins of 35% to 36% for the full year with the impact of Crossix and Physicians World resulting in roughly 250 basis points of headwind.

In summary, it was another great quarter. The team's outstanding and consistent performance has set us on track to reach our target of $3 billion in total revenue by calendar 2025. 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 our first question comes from Sterling Auty with JP Morgan. Your line is open.

Sterling Auty -- JP Morgan -- Analyst

Yes. Thanks. Hi, guys. You mentioned IQVIA in the prepared remarks. We've got a number of questions around the competitive displacements in the CRM side. Could you just maybe go into a little bit more detail into those situations and just how you're seeing that competition shaping up?

Paul Shawah -- Senior Vice President-Commercial Cloud

Yes. Hey, Sterling. Hi, this is Paul. Thanks for the question. So I'll take that one. They did announce, I think, their number was 70 wins historically, and then I think they announced a couple of two small divisions of large enterprise customers. And those kinds of things are going to happen. We based on, I think it was kind of aggressive discounting and pricing and our bundling combined with account specific factors, those sorts of things will happen. I don't see that as a trend. In fact, Veeva is gaining share.

I'm really pleased with the progress that we've had in core CRM over the last couple of quarters. In this quarter in particular, we've actually grown market share and I think that's largely driven by the strength that we've had in the small and medium-sized business segment. Pre-commercial customers are going to Veeva. They're embedding their launch on a vendor and a partner that they can trust and then existing customers are expanding.

So, and I think I'm really pleased with the progress, and we continue -- our strategy really hasn't changed. We continue to focus on customer success and product innovation and also executing which is over the long term, which is what I think customers continue to win.

Sterling Auty -- JP Morgan -- Analyst

That's great. One follow-up just along those lines, for the investors that are newer to the story, can you help them understand this idea of the one key data? They look at and say, wow, they've got this data that seems to be almost must have by the customers and bundle it into the CRM, is there a risk that you could -- that you could lose market share before anything happens in the courts or something else in the marketplace?

Peter Gassner -- Founder, Chief Executive Officer

So the anti-competitive behavior that we've seen from IQVIA has been focused on our primarily three of our products. Network is where it started. Then Nitro, and then more recently Andi. It has not been -- we haven't seen any impact on core CRM. So I think it's unlikely that that will impact the core CRM business or have any impact on share, really growth going forward.

Sterling Auty -- JP Morgan -- Analyst

Great. Thank you.

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, guys. Maybe the first one for Tim. When we're looking at that fiscal '21 revenue outlook, I know the expectations, you guys are going to really talk about the M&A too much there, but could you maybe help us unpack, how much of that contribution is M&A specific versus what's organic?

Tim Cabral -- Chief Financial Officer

Yes, can we -- as we are -- as I said in my prepared remarks, we're deeply integrating these two solutions into our Commercial Cloud business. So it's not our intention to break out the inorganic piece specifically going forward. We wanted to do it this year to lay the foundation of the expectation of what those businesses will contribute especially after you take into account purchase accounting for the rest of the year, but that's not our plan going forward, because we're integrating these businesses so deeply into the overall commercial cloud business.

Ken Wong -- Guggenheim Securities -- Analyst

Got it. And then as far as that I mean that 250 basis point headwind to two Op margins, I guess, any sense for kind of how that fades away after next year. Obviously, I don't want to kind of guide to the following year, but is that something that we should expect in terms of investments will still be something that weighs on the business or more of a one-year impact?

Tim Cabral -- Chief Financial Officer

Yes. So I think there's two components to that, Ken, as you think about next year. One is, as you said, and you heard, Peter and I talk about these are businesses or solutions that will continue to invest in. I don't think that's a one-year phenomenon. I think that is probably over time and the other piece of it is obviously some of the purchase accounting spills into next year, which also impacts the operating margin impact that they have. So I think that obviously goes away after the first half of next year, but I think that these are businesses that we're bullish about and we think with investment we have an opportunity for customer success and long-term growth opportunities.

Ken Wong -- Guggenheim Securities -- Analyst

Got it. And then maybe a quick one for Peter. You mentioned CDMS advancing faster than expected and will be out of early adopter phase next year. How should we think about what that means from a customer adoption perspective is this typically when you might see the kind of the slow adopter fast followers kind of dynamic kick in, or is that should I interpret that differently?

Peter Gassner -- Founder, Chief Executive Officer

I don't think there'll be a rush, so to speak, because customers have their natural time when they adopt these things, and we're not going to impact that too much. And they will always start small with a system like that. So, no, I don't think so. I think it'll be steady progress, but start to be significant in revenue in the coming years.

I guess if we step back, the main thing -- the main news here is Veeva handling the most complex and the largest trials, that's really says the product has arrived and that bodes very well for our future.

Ken Wong -- Guggenheim Securities -- Analyst

Got it. Great. Thanks, guys.

Operator

Your next question is from Bhavan Suri with William Blair. Your line is open.

Bhavan Suri -- William Blair -- Analyst

Thanks for taking my questions, guys, and nice job there. I wanted to follow up on Sterling's question a little bit on the competitive front. You touched obviously on the commercial side. I'd love to see if you're seeing any more competitive changes on the clinical side? And then as you look at sort of the CDMS or specific EDC part of the clinical side, any change at current environment, given that obviously the big player there was acquired by Atalasoft [Phonetic].

Peter Gassner -- Founder, Chief Executive Officer

I'll take that one. In terms of the CDMS with the clinical side, we're seeing no change in the competitive environment that we're really focused on our own execution with our early adopters polishing out that product and service offering, and getting ready for that to become a very big business on the CDMS -- on the broader R&D side development cloud, also no changes in the competitive environment there. Development class really accelerating. When you think about 2,000 people at R&D customer summit. That's one of the biggest events of the year in life sciences. So really there the momentum is increasing. I think customers are planning for Veeva over the long term on the Development Cloud. These are very crucial Systems, very sticky integrated system. So customers are thinking 20 years down the road, literally on these types of things.

Bhavan Suri -- William Blair -- Analyst

That's helpful. I guess I wanted to follow up a little bit on that. We pick the first product, I think the first real Vault product if we go back to traditional nomenclature was eTMF and given, so that's been the market longest a little color on sort of growth rates and penetration of that business given it's the most tenured from that space really helpful obviously CTMS falls kind of ties into the eTMF space, but love to understand how eTMF has been doing? You touched on RIM and other pieces, but help us understand how the core first product is doing in terms of penetration and growth?

Tim Cabral -- Chief Financial Officer

Thank you. Yes, it's still growing quite nicely actually. I won't get into the exact penetration rates, but growth as measured by bookings that's happening, very strong in eTMF this year and you might wonder, OK, well, what -- how can that be. Well, it's a big industry with a lot of players. So yes, our early adopters, I would say, we're into the middle getting into the late majority if you look at the classic crossing the CASM, there is still plenty of customers that don't have our eTMF.

And also in life sciences, industry overall is growing and the number with the move to precision medicine, the number of biotechs is growing, is up significantly from when Veeva started in 2017. So the market is actually for eTMF has probably grown significantly since the time we introduced it in 2012, and it continues to grow.

Bhavan Suri -- William Blair -- Analyst

Thank you, guys. Appreciate the time.

Operator

Your next question is from Stan Zlotsky with Morgan Stanley. Your line is open.

Stan Zlotsky -- Morgan Stanley -- Analyst

Hey, guys, good afternoon, and thank you for taking my question. So I wanted to actually go back to the CDMS, the big win for Phase 2 -- Phase 3 drug trial that one was very impressive to us, because we didn't hear a whole lot of big success of with like Phase 2 drug trials and now we have this mega Phase 3 dropping in at a top 20 pharma, no less. Maybe just walk us through, like how this one came together and are there similar type of engagements that you have in your -- on the horizon. I'm not necessarily saying it for Q4 or anything else like that but just as we look forward is that -- is the product mature enough where I can very effectively handle these massive Phase 3 trials? And then I have a quick follow for Tim.

Peter Gassner -- Founder, Chief Executive Officer

Okay. Yes. This large trial, this was at a customer top 20 pharma, that we have signed a long-term enterprise license agreement with. And then when they do that, they were the first to sign long-term enterprise license agreement with us in the top 20. When they do that they will start with clinical trials that are smaller and less risk could be smaller Phase 3s, Phase 2s, Phase 1s. And when they're doing that our product is new and they're testing that out, but also they're adjusting their processes.

So now they have their processes as it relates to Veeva figured out enough and our product has matured enough now they're taking on this very, very large trial. So that's kind of unique. We have no other customer doing that yet, but we have a number of customers we're in discussion with -- discussions with that could result into these long-term enterprise license agreements. So there is -- the level of activity is high when that's going to actually turn into a booking or sale, that's something we can't predict yet at this time, but the level of activity is very high.

Stan Zlotsky -- Morgan Stanley -- Analyst

Okay, perfect. And a quick follow-up for Tim, on billings, as we think about the Q3 and Q4, anything to call out from a one-time standpoint, either in Q3, maybe FX or anything like that. And just how we should think about Q4 billings, if there's anything to be mindful of other than the $30 million of calculated benefits to Q3, Q4 billings from acquisitions?

Tim Cabral -- Chief Financial Officer

Yes. There are no FX impact obviously in -- I shouldn't say obviously, no Q3 impact of FX. In terms of Q4 and Q3, there is no one-time and I think what you're hinting at is there are movement of someone's renewal date changes that the dynamic of the annual billings and the quarterly billings, no, none of that we saw in Q3 or we are projecting in Q4.

Stan Zlotsky -- Morgan Stanley -- Analyst

Perfect. Thank you so much.

Operator

Your next question is from Brian Peterson with Raymond James. Your line is open.

Brian Peterson -- Raymond James -- Analyst

Hi. Thanks for taking the questions. So wanted to follow up on Sterling's first question on the CRM side of things. But it sounds like you're continuing to gain share there. I'm curious where we are in terms of market share? Where do you think that number could get to? And just maybe an update on the penetration rates of some of the add-on products?

Paul Shawah -- Senior Vice President-Commercial Cloud

Yes. Hey, Brian, this is Paul. So yes, we are north of 80%. I think we talked about a while -- a quarter or two back, that we hit that north of 80% mark. It's still growing. I think we can see -- pretty fair to see line of sight through to 90% after that it gets a little harder to predict. So that the share continues to increase. And I think again it's tied to our ability to execute in the marketplace. I mean customers are clearly looking for a partner who can deliver and make sure that they're going to be successful. So we're going to focus on customer success and innovation. So I think that's 90% is probably clear line of sight to but then after that, it's maybe a little bit harder to predict beyond that.

Brian Peterson -- Raymond James -- Analyst

Any perspective on the attach rates of some of the products like Approved Email and some of the add-ons that you've had?

Peter Gassner -- Founder, Chief Executive Officer

Yes. So Approved Email continues to be really high. We've had -- it's north of 60%, and that's really driven by Veeva helping move the industry to become more digital, enabling the field teams to be able to communicate with customers via digital engagement. So we've really -- I would say we've been successful in moving the industry there, and our customers have had a lot of success doing that. Then if you look across some of the other add-ons, events is moving quite well and that's north of 20%. And then some of the other add-ons like Align are closer to 10% in terms of account penetration. So there's still a fair amount of runway for the add-on products, and in terms of the overall opportunity.

Brian Peterson -- Raymond James -- Analyst

Great. And maybe just one more follow-up. Obviously, we've seen two acquisitions in pretty short order here curious appetite for additional M&A with the cash on the balance sheet? Thanks, guys.

Peter Gassner -- Founder, Chief Executive Officer

Yes, in terms of other M&A, we're always looking. Right. You look a lot, you don't purchase very many, but you look a lot, and we happen to find two that really fit for us. So we'll always keep doing that. What fits for us is, I can just explain that a little bit, it's when we find a cultural fit and a synergistic fit with the business and we have the right leader to run that business and we can find where one plus one equals three. So we're always looking, and sometimes we will find those where we can add value for the customers we can create new value, and then we'll execute on that, but it's generally rare. You look a lot and you find a little.

Brian Peterson -- Raymond James -- Analyst

Thank you.

Operator

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

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

Hey, guys, thanks so much for taking my questions. First, I just wanted to maybe start off with a comment, Peter, you made in the prepared remarks on IQVIA and how you're seeing customers pushing back against their behavior and adopting OpenData. Is that something that if this trend kind of continues it can start to serve as a tailwind for adoption of products like Nitro that in the past have been hurt by the lack of access to data? And then I've got a follow up.

Peter Gassner -- Founder, Chief Executive Officer

Yes. If we look at the set the stage for the overall concept here with IQVIA, IQVIA has some near monopoly positions in two types of data .They have the sales data area and then they have the reference data that's the OpenData, and their preventing that data from going into some of the Veeva software products and that's harming the uptake of those software products, particularly that's network, that's Nitro and that's Andi.

As it relates to one key there is competition there now we have OpenData. So some customers are moving to OpenData. Unfortunately, in the case of Andi and Nitro, they would need the sales data and the reference data. So I don't see good progress for Nitro and Andi until we can resolve this issue completely with IQVIA which will have to probably be resolved by the courts, where we are seeing progress for Nitro particularly is in companies that use alternative data sources, not in some markets, some certain types of countries, not all companies will need IQVIA data. For example, in Japan, there is another data provider there called [Indecipherable]. It's making great progress in Japan, particularly with a Japanese domestic.

So that's kind of the lay of the land there. The extreme behavior by IQVIA on one key is actually helping our OpenData business a bit. That's not going to be the magic that will unlock network or Andi or Nitro will need a more fulsome solution for that.

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

Got it. That's really helpful. And then I just wanted to maybe go a little bit into if you've seen any -- do you have any updates for us on the Engage business [00:47:57] there's been any areas where you're seeing particular traction and maybe how we should be thinking about what's the runway of Engage looks like from here since we've been talking a lot of our Commercial Cloud today? Thanks.

Paul Shawah -- Senior Vice President-Commercial Cloud

Yes. Hi, this is Paul. And Engage is doing well. Again, as the industry is trying to become more digital, this opens up a channel for field reps to interact with customers remotely via live meetings. So it's really a way that's increasing access for customers. So customers that may be difficult to see face to face were that want to interact with a pharmaceutical company online at their own convenience are using Engage and it's starting to catch on there, but it's a significant change management.

Remember, this is an industry whose call face to face on customers on doctors for a long time for pretty much effort, and this is a change management from a Rep perspective, but also from a doctor perspective. So, the early -- what we're seeing with our early customers is for getting great results. They're getting a lot of time with customers sales calls that may last between 15 minutes and 20 minutes and then also getting access to doctors that they may not have gotten access to face to face. So really significant benefit, but it will take time because of the change management. So I think as companies learn more, over time I think you'll start to see this market play out over the next couple of years will becomes more standard way of doing business. I think it's still in the early stages, but the results are proving out to play out well.

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

All right. Great, that's helpful. Thank you so much, guys.

Operator

Your next question is from Scott Berg with Needham. Your line is open.

Scott Berg -- Needham -- Analyst

Hi, everyone. Thanks for taking my questions. I wanted to follow up, and I don't who want to take the first one, but it's on the Crossix acquisition spent a lot of time at Dreamforce last week at your booth there trying to understand what the product is, and came away with a good understanding. Could you help us understand maybe how you take some of that marketing data and actually integrate it with the rest of your commercial cloud and maybe have a mutual benefit to sell all the solutions more holistically?

Peter Gassner -- Founder, Chief Executive Officer

Yes. So Crossix, if you look at the core, what they bring to the table, it's data science and it's understanding of patient behavior. Backing that is hundreds of million -- data on hundreds of millions of patients and millions of doctors in the U.S. and all types of data on that. Now what. So it's a hundreds of terabytes of data and significant data science algorithms on that which Crossix uses to measure the effectiveness of digital marketing.

Now where we can take that in the future that's we're refining our plans right now. Right we have CRM, we have OpenData, we have Crossix and we're making plans both to improve the existing Crossix products and to create brand new products. I'm not ready to announce those specific plans yet, but we'll certainly let you know when we're ready for that. But overall it's exciting. It's Veeva's entry into data science and we bought a company that has 15 years experience in it. We're really the thought leader in it. They were doing data science before there was the term data science. So I'm really excited about. It's going to be a transformative acquisition for Veeva.

Scott Berg -- Needham -- Analyst

Great, helpful. And then from a follow-up perspective Tim, you had a big jump in unbilled receivables in the quarter. I think we all understand in the 606 World what causes that generically. But was there a certain type of contract or a certain set of products that made that jumps so materially from one quarter to the next. Just kind of maybe help understand that dynamic. It was a little bit unusual from your recent trends?

Tim Cabral -- Chief Financial Officer

Yes, Scott, one thing to note is when you look at the unbilled receivables number that you will see in our balance sheet that is a combination of subscription and services. And we'll typically see that in Q3 because October becomes a pretty big utilization month for whatever reason for us. So that was helped by services quite a bit. There wasn't any specific new types of subscription deals that we closed in the quarter that would have impacted that Scott. So I think it's similar what we've talked about in the past in terms of these multi-year ramping fee deals that do not have the ability for renewal on an annual basis. So I think it's the same type of deal. But in Q3, at the end of Q3, you'll see a little bit of a pop from services unbilled revenue there.

Scott Berg -- Needham -- Analyst

Very helpful. Thanks, again.

Operator

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

David Hynes -- Canaccord Genuity -- Analyst

Hey, thanks for taking my questions. I want to ask about Physicians World. So maybe for Paul, a bit of a break from the norm acquiring a largely services business. So I guess the question is do you see a big opportunity to sell events management software into their base. Was that part of the rationale for the deal? And then just stand-alone, is there a significant opportunity for margin optimization in that business?

Paul Shawah -- Senior Vice President-Commercial Cloud

Yes, David. Thanks. So the rationale was really driven by combining great software with great services. So what Physicians World does is that the majority of their business was focused around providing logistics services to their customers. When a life sciences company does an event, they invite a thought leader to talk to a number of customers. They often have to get a hotel, they have to pay the speakers, there's a bunch of logistics that are associated with managing that event. And that's exactly where physicians will play.

Now, these are really significant thought leaders. They are important people to the life sciences companies. So you need to provide great white glove service and that's why that's exactly what Physicians World provides to customers. So the opportunity for Veeva was to provide both of those under one roof because our customers were asking us, they want a one vendor to make sure that it was really seamless and really fully integrated. Our analysts to have that choice of having one company providing end-to-end solution. So that's the -- that was the rationale for acquiring Physicians World. I'll let Tim comment on the kind of the margin optimization part of that.

Tim Cabral -- Chief Financial Officer

Yeah. So, DJ, to Paul's point, this is very important that it be high quality and white glove service. So I don't know if there is -- I wouldn't say there is no margin improvement potential especially as that business scales out. I think the combined events software business and services business that we now have and being delivered from Veeva, there is an opportunity there from a margin optimization, both in terms of just normal margin and then at some level of economies of scale.

David Hynes -- Canaccord Genuity -- Analyst

Yes. Okay/ Make sense. And then Peter, so you've taken a pretty prudent approach to scaling efforts outside of life sciences and I know this is the playbook you ran early days and kind of core life sciences market. So I'm wondering what is it that you're looking for and kind of your cornerstone OLS clients that could serve as a signal that the time is right to step on the gas in terms of incremental investment there?

Peter Gassner -- Founder, Chief Executive Officer

I guess what we look for is, do we have product market fit, do we have capacity. Are we able to take on more customers and not have issues. So in the core market that we're going after now we're getting close where we've got in the quality and the regulatory product areas in CPG, Chemicals and Cosmetics. We were having a lot of discussions in there. And so we're getting pretty close, but we will stay in that market for a good long time here. It's a big market, it's about as big as our CDMS, and we'll be very prudent if we -- if and when we pick another market outside of life sciences. That's sort of the hallmark of Veeva right. You really get laser-focused on the specific needs of the product in the industry, work it out with the early adopters and then you know exactly who to sell to and you have exactly the product you need and that takes time.

David Hynes -- Canaccord Genuity -- Analyst

Got it. Very good. Thanks, guys.

Operator

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

James Rutherford -- Stephens -- Analyst

Hey, thanks, good afternoon. I've got a couple of questions on commercial, if I may. Paul, you talked about winning back that top 50 European Pharma from IQVIA. Just curious given how they often times discount these deals pretty heavily may try to lock in customers for, in some cases, three years to five years. I'm just curious what the situation was here and whether this customer was one that went live and wasn't pleased or was it a failed implementation that brought this customer back into the fold? Just any color you can provide there.

Paul Shawah -- Senior Vice President-Commercial Cloud

Hey, James. Thanks. So just to clarify on that one, this was a -- it's top 50 company and they have Veeva CRM and they have Veeva in the U.S. marketplace, and they've been a long time Veeva customer in the U.S. and very, very successful. They also had IQVIA -- legacy IQVIA in the European region. So they were operating essentially separately regionally for a long period of time, which is common particularly in companies of that size, where they have different systems in different regions and what they wanted to do was to centralize and harmonize more globally. So they had a decision to make, and they had experience, deep experience with both Veeva and IQVIA. And based on their experience and their -- kind of their -- they had to choose a partner that they could trust can execute on a global program. So they based on that and kind of our track record of success that we've had with them in the innovation, they chose Veeva. So wanted to be clear as to what was the context behind that they knew both Veeva and IQVIA quite well.

James Rutherford -- Stephens -- Analyst

Perfect. I appreciate that clarification. And a follow-up on commercial. A much longer-term question. It seems like there has been a trend that physicians are having fewer and fewer in person interactions with sales rep. But the reporting that I've seen has said that newer digital engagement formats like email or virtual meeting may not necessarily be filling that gap entirely with the implication being that physicians, or perhaps they are pulling information they need directly from the farmers or something like that. So I'm just curious, given that you all see more data on these interactions than anybody else in the market. Is that a fair description, and more generally, what do you think the long-term role is for the pharmaceutical sales rep in this industry?

Peter Gassner -- Founder, Chief Executive Officer

Yes, that's a good question. And I would say that for the in-person interactions that it's actually not really decreasing over time. If you look at the number of reps globally that are in the industry that's actually increased a bit over time. It shifts a little bit by country, some countries, and a decrease in companies within countries tend to decrease, and others tend to increase as their portfolio changes over time. Drugs go off patent and then as new drugs are launched, they may reduce in one area and then increase in another area. So the number of reps has been relatively constant. And as you -- as the market is launching more specialized drugs, they tend to be more scientific in nature and you need people, you need human beings and the relationship becomes really, really important to getting those drugs out into the marketplace and into the hands of the right customers and the right patients. So I don't see -- I certainly don't see having the data does not show that it's diminishing and actually shows it's pretty constant. And I see digital increasing at the same time.

So when I look back at our Approved Email utilization, and even newer with Engage, the utilization is increasing over time. So the industry by and large is doing digital at the same time that they're doing roughly about the same -- roughly the same amount of face to face interaction. And I think that's where we will trend for a while, particularly as the industry becomes more scientific and as the industry approaches more precision type medicines, it's -- I think that mix will continue for a long time.

James Rutherford -- Stephens -- Analyst

Got it. Very helpful. Thank you.

Operator

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

Stan Berenshteyn -- SunTrust Robinson Humphrey -- Analyst

Hi, this is a San Bernstein on for Sandy. Thanks for taking my questions. A lot of my questions have been asked, but maybe to put a finer point on it. You mentioned IQVIA became more anti-competitive this quarter, can you maybe elaborate on what exactly was escalated this quarter versus the past? And then maybe as a follow-up to what extent does Crossix have the capabilities to provide a data alternative to IQVIA? And Peter maybe you already touched on that, but is there any potential to provide some kind of a data offside or date alternative IQVIA? Thanks.

Peter Gassner -- Founder, Chief Executive Officer

Yes. The first question about IQVIA, just more -- I guess more of the same from IQVIA, but may be more rhetoric from their field team. I guess that's some of the echoes. We've even seen in some of our Vault products where the customers wanted to put in some one key data and IQVIA said OK can't put it into Vault product now, the reality is that one key date is not so important to the Vault products at all. So the customers just said, OK.

We're going to go forward anyway, and in one case that led them to using open data in one of those things. So that's the type of stuff they haven't done before. So I think they're getting a bit desperate or some type of thing and that's having a bit of a backlash in the customers. So that's that one.

In terms of Crossix, do they have assets that we can leverage into other data products. Certainly, there is a lot of healthcare data and assets on that Crossix has, doesn't have all the things that we would need yet to do any kind of a sales data, anything like that, but it's certainly something that -- it's not impossible that we do that in the future. We don't have any specific plans at this time. But, it's always an option.

Stan Berenshteyn -- SunTrust Robinson Humphrey -- Analyst

Got it. Thank you.

Operator

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

Chris Merwin -- Goldman Sachs -- Analyst

Okay. Thanks for taking my question. For quality one you called out I think a CPG customer going live with the regulatory product and I know you've mentioned multiple customers taking claims already as well. Can you maybe help us think about the magnitude of some of these deals or maybe how we should be thinking about milestones in general for Quality One, as you continue to build our referenceable customers there.

Peter Gassner -- Founder, Chief Executive Officer

Yes. These are -- so the things I think about are when we have activity in the top '20s that really can move the needle for us, not the initial activity, but over the long term. And as we look to have customers of $10 million a year or more of revenue $8 million. So those would be milestones that we would look at. And that just takes time to build up, and to do that, you need to have multiple successful products into these large enterprises. And it all starts with a product somewhere in a division. And even before that, it starts with discussions building relationships and the customers really understanding their business. That's what I'm excited about over the last quarter or two, the depth of relationships we're building and the inquiries we're having and the discussions we're having.

Chris Merwin -- Goldman Sachs -- Analyst

Okay, great. And maybe just coming back to Crossix for a minute. It sounds like there is quite a bit of work being done, not only in their products, but perhaps some new products as well. I know it's early, but is it fair to say that in the context of next year's guidance, it doesn't really include any benefit of those new products or cross-sell with your existing sales force?

Peter Gassner -- Founder, Chief Executive Officer

Yes, new products -- they for any new products we would make that, that takes a while to. First, you got to make the products, you got to get a few early adopters. So even if you look at products that we announced for three or more years ago things like safety or CDMS, those are very, very early. So, if you would look at them, they're not very material to our financials now at all. So that takes years, three years, four years, five years to get material.

Now in terms of -- you can see it in our financials in the investment, right. If you look at some of our investments going forward and then things I'm really excited about is that we continue to build for the future. So the level of investment, I can call out three particular areas where we'll have heavy investment that's in our safety product where we're getting a lot of customer interactions and where we have new modules to build and we're doing that. So we have to build out the field team, the product team and safety there.

Also CDMS, more to build out of the -- on the product, more to build out in the field team as we see that business starting to ramp. And in the Crossix area, that's where we will look to our new product roadmap and what we need to build out there. So the three significant areas of investing. That's what makes me excited because that makes sure our future is bright, all the way through 2025 and beyond.

Chris Merwin -- Goldman Sachs -- Analyst

Okay. Thanks.

Operator

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

Tom Roderick -- Stifel -- Analyst

Hi, everybody. Thank you for taking my questions. So I guess the first one, I wanted to kind of go back to the -- I think it was Stan that asked this earlier. Just a question on the CDMS win and I think it's obviously a big deal to land a Phase 3 trial. Can you just talk a little bit more about the dynamics of what is required with that product aside from just sort of scale and being able to scale up to 12,000 patients along those lines. What additional features were required for you to kind of get into this win. I would imagine that was a pretty long competitive process. Perhaps you could talk about that?

And then lastly, at the Analyst Day, you spoke about the clinical query language. I know it's very early, and probably customers haven't seen much of that yet, but what is the response been to the idea of a new and perhaps more flexible query language on the back end of that? Thank you.

Peter Gassner -- Founder, Chief Executive Officer

Yes. As far as the CDMS and the large trials what we needed to do there? Well, there were a lot of things in the product but around the product. So for example, we talk about 700 sites, all around the world. I think 30 plus countries have to get our support infrastructure. We had to get our support infrastructure up to speed and very understanding about clinical because you're actually doing the end-user support for clinical investigators in Japan, in Russia, et cetera. So that's an example of one thing we had to get ready. We had to -- our performance, right, we had to have our performance tested ready, architectural things buttoned up, sample test environments, et cetera, to handle that level of scale and complexity of data that's going in there.

And then administration. Okay. How are you going to administer all these clinical investigators that are coming in and around the world. You have to handle all the loose ends and the loose corners that only come with experience. Software is sometimes you know it can be like a person, you got to go through some bumps and bruises to get to maturity. So it's just the maturity of the software and all the processes around the software including the scale of our professional services team and our partner network.

Nobody is able -- has ever run up this large of a study on Veeva's CDMS before, and our approach is different. The technology is different. It's more agile. So there is different operating roles that need to be established inside of the pharma company and that all needs to get worked through the system.

And in terms of the CQL, I would say there is -- I wouldn't say handful, but certainly in the 10s of people inside the industry who really get it, what this CQL can be. It sort of the early adopters who are thinking forward because have to remember workbench is not available to any customers yet. We're targeting toward the early part of next year available to the first early adopters. So we haven't seen the impact of the CQL or the data workbench yet. So far, the excitement is around the much better clinical data management system.

Tom Roderick -- Stifel -- Analyst

Outstanding. Okay, that's great. Thank you, Peter. Tim simple one for you, maybe we have to wait on this, I didn't hear if you gave the RPO number, is that something we just need to wait for the Q1 or do you have that handy that you can share that with us?

Tim Cabral -- Chief Financial Officer

I don't have it handy right in front of me right now, Tom. We'll have it in the Q for sure. Rick and I can -- well, we should wait for the Q.

Tom Roderick -- Stifel -- Analyst

I'll wait for the Q. Perfect. That's it from me. Thank you, guys. Appreciate it.

Operator

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

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

Oh, great. Thanks, guys. Wanted to ask about the seven of 10 CPG firms that you mentioned. That sounds like great progress in pipeline, in discussion there, or outside life sciences. If you look at where those customers are today and what they're using QualityOne for versus, say, some of the earlier wins, I guess, how are you seeing the use cases evolve outside life sciences, particularly within those -- within the CPG vertical, which sounds very good?

Peter Gassner -- Founder, Chief Executive Officer

Yeah. We have an active discussions with seven out of the top 20 CPGs and what we see there is a lot of cross-pollination between the quality area and the regulatory area. So that's a common theme when we talk with the customers we see a lot of concern and interest in environmental stewardship. A lot of knowledge that the consumer goods is always faster moving all the time in different parts of the world. So they want to get from innovation out to the short -- to the store shelf as fast as they can. A lot of concern about the environment and what they need to do to be environmental-friendly and good stewardship to the environment. So those are common themes.

And the other one is looking for a partner that can scale across quality and regulatory to these companies that have over 50,000 people and they just have not had a partner that has been able to do that so far. So they would implement departmental solutions, may be a quality -- maybe if they have 20 manufacturing plants, they might have 20 quality solutions. Now they are seeing, OK, potential Veeva to have a unified quality system or a unified regulatory system rather than one for every different country or every different plant. So that -- those would be the common themes.

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

Got it. Thanks, Peter. And then one more, if I may, please. I didn't hear you mentioned outside life sciences is one of the top areas of investment. Should we take that to mean that you're still kind of early on in your reference selling there such that maybe the investment cycle for go-to-market sales personnel might be longer term?

Peter Gassner -- Founder, Chief Executive Officer

Yeah. I think in terms of -- we're certainly investing appropriately outside of life sciences. I think the delta increase in spending will be actually larger in the Crossix, in the safety, in the CDMS, because we see more product work there that we have to do over the long-term. We're still investing in outside of life sciences is just that it will be a little bit heavier in those three other areas.

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

Got it. Thanks, Peter.

Peter Gassner -- Founder, Chief Executive Officer

Thanks.

Operator

And our last question is from Kirk Materne with Evercore ISI. Your line is open.

Peter Burkly -- Evercore ISI -- Analyst

Hi, guys. This is actually Peter Burkly on for Kirk. Thanks so much for taking the question. You mentioned a couple of times, you're kind of growing partner ecosystem. I kind of just wanted to see if you could dive into that a little bit further, provide some color on how you're continuing to leverage this partner ecosystem to drive sales and scale both within and outside of life sciences.

Paul Shawah -- Senior Vice President-Commercial Cloud

Yeah. Hey, Peter, this is Paul. We -- when we think about providing solutions to our customers, certainly, Veeva is a very significant strategic partner to the industry, whether it's inside of life sciences or outside, but we're not the only -- certainly, not the only technology provider that any company will have. So, really big part of our model is to be partner-friendly and to give customers choice. We have a very open partnership model, even in areas where we have existing solutions. So the Physicians World acquisition is one good example. We made an acquisition in an area where we saw services being really strategic and a key area for our customers. They were asking us to get into that area and help them. Yet, we continue to partner in that same exact area. So we will -- we have other logistic services providers and we'll continue to support them for the industry. So, our philosophy around partnering is to be very open to give our customers choice and make it really, really easy for customers to do business because we know that we're not going to be the only vendor in the landscape and our mission is to help make our customer successful and in part of doing that is making integrations and services accessible and really easy for customers.

Peter Burkly -- Evercore ISI -- Analyst

Okay, great. Thanks so much. That's very helpful. Just maybe one quick follow-up, if I can. Just curious if you have -- can you provide any color on the continued search for a CFO, to follow up with Tim.

Tim Cabral -- Chief Financial Officer

Yeah. Hey, Peter, this is Tim. So, we continue to build the pipeline on that particular role. It's very important as you can imagine to both Peter and myself. So we continue to build the pipeline, both identifying candidates and getting some interesting inbound folks and talking to our network of people who know this role quite well. One thing to remember and I think you do remember this Peter is, I have committed to the Board and to Peter and the management team and the Company here that I'm here until we bring that person on and get that person on-boarded effectively. So there's no real timetable for my departure. So it gives us the opportunity to really be thoughtful here and that's what we're doing.

Peter Burkly -- Evercore ISI -- Analyst

Okay, great. Thanks very much, Tim. Appreciate it, guys.

Tim Cabral -- Chief Financial Officer

Thanks, Peter.

Operator

Ladies and gentlemen, this does conclude the Q&A period. I'll now turn it back over to Peter Gassner for any closing remarks.

Peter Gassner -- Founder, Chief Executive Officer

Thank you, operator. I would like to thank everyone for joining us today. We wish you all a wonderful holiday. Thank you.

Operator

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

Duration: 66 minutes

Call participants:

Rick Lund -- Head of Investor Relations

Peter Gassner -- Founder, Chief Executive Officer

Tim Cabral -- Chief Financial Officer

Paul Shawah -- Senior Vice President-Commercial Cloud

Sterling Auty -- JP Morgan -- Analyst

Ken Wong -- Guggenheim Securities -- Analyst

Bhavan Suri -- William Blair -- Analyst

Stan Zlotsky -- Morgan Stanley -- Analyst

Brian Peterson -- Raymond James -- Analyst

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

Scott Berg -- Needham -- Analyst

David Hynes -- Canaccord Genuity -- Analyst

James Rutherford -- Stephens -- Analyst

Stan Berenshteyn -- SunTrust Robinson Humphrey -- Analyst

Chris Merwin -- Goldman Sachs -- Analyst

Tom Roderick -- Stifel -- Analyst

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

Peter Burkly -- Evercore ISI -- Analyst

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