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Veeva Systems Inc (NYSE:VEEV)
Q4 2020 Earnings Call
Mar 3, 2020, 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 Fourth Quarter Results Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today Rick Lund, Head of Investor Relations. Please go ahead sir.

Rick Lund -- Head of Investor Relations

Good afternoon, and welcome to Veeva's Fiscal 2020 fourth quarter and full-year earnings call for the quarter and year ended January 31st, 2020. 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, March 3rd, 2020. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but we'll not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

On the call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K filed with the SEC just before this call. As you may have also seen in our earnings 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 webcasts.

Finally, I'd like to remind everybody that we closed two acquisitions in the fourth quarter. On this call, we will provide details around how these acquisitions impacted our Q4 and fiscal 2020 results and how they contribute to our fiscal '21 guidance for total revenue and Commercial Cloud subscription revenue. In addition, we will in some cases provide growth rates comparing periods that include the contribution from these acquisitions to periods that do not.

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

Peter Gassner -- Founder and Chief Executive Officer

Thank you, Rick, and thanks to everyone for joining us today. Q4 was another strong quarter with results ahead of our guidance. Fourth quarter revenue was $312 million, up 34% year-over-year, subscription revenue grew 33% and our non-GAAP operating margin was 34%. Past year was an exceptional one for Veeva. We retained our deep focus on customer success and product excellence. We expanded our leadership position and passed $1 billion in revenue a year and a half ahead of plan.

We accelerated our pace of innovation in established and new markets and we made a potentially transformative acquisition with the addition of Crossix. We've refined our operating model for driving innovation in existing markets while also creating new agile start-ups within Veeva. This gives our start-ups like CDMS and safety, the autonomy to be laser focused on new markets, while our core teams remain dedicated to transformation in their areas like in CRM for example, where we are embedding AI in ways that will fundamentally advance the industry.

Also key has been the growth of our leadership team, which has expanded thanks to the exceptional new people we brought on board this year and the very talented people that have developed within Veeva. In all, we have set ourselves up well from a product, operating model and team perspective to execute on the major opportunities ahead and to achieve our $3 billion revenue target in 2025. Thank you, and congratulations to the entire Veeva team for their outstanding work this year.

Now I'd like to share some highlights for the quarter and year. It was a record quarter and year for Veeva Commercial Cloud. We further extended our leadership in core CRM. Our bookings increased over last year and we also saw an increased pace of new customer wins adding 53 new customers, compared to 46 the year prior. Our strength in core CRM is fueling growth in Commercial Cloud overall as companies look to Veeva as their commercial foundation for the future.

For example, in the quarter, a cutting edge specialty diagnostics customer, who was anticipating hyper growth expanded their use of Veeva CRM and adopted five additional Commercial Cloud applications enterprise wide. This seven figure deal with our largest ever in commercial SMB and shows the strategic importance of our solution for companies of all sizes.

Veeva OpenData also had a number of wins in the quarter as we continue to gain momentum in the data market. One of our key wins was a top 20 pharma selected OpenData in the US replacing their current solution, head-to-head they found our data was better and more expensive. This is key as they move to new selling models that required greater depth of information, agility and the vendor that operates as a true partner committed to their success.

Also in the commercial area, I'm pleased to share that Crossix close the year strong with revenue coming in right on plans. The acquisition is going exceptionally well. The Crossix team has brought new DNA around patients and data into Veeva. Coming together we'll go well beyond what either company could have accomplished independently. We have an exceptionally strong joint vision and roadmap, which you'll hear more about this year.

Before moving to Vault, I'd like to extend a special thanks to the Veeva CRM team for their rapid response to help our customers navigate the challenges surrounding the coronavirus. For Veeva CRM customers not currently using engage meeting, we are providing free access through September for field users in impacted areas. This allows reps to connect online with the doctors that depend on them for information about the latest research and treatment for their patients.

In Veeva Vault, we had a best quarter ever capping off a great year that was driven by strength across product areas and geographies. We are winning more new Vault customers and existing customers are expanding their use. We closed the year with 715 Vault customers, up 25% from a year ago and existing customers continue to buy more based upon their success with Vault and because of the benefits of having all applications on a single modern cloud platform. Our average Vault customer now has two to three Vault applications.

The Vault platform has proven to be a unique and powerful asset allowing us to rapidly develop and scale applications across a range of areas. We now have 18 Vault applications in all. Regulatory is a good examples of momentum we were seeing across the Board. In the quarter at top 20 pharma and a top 50 pharma selected Veeva Vault RIM as their enterprise standard. These customers were struggling with a patchwork of legacy and custom built solutions. One will replace more than 80 systems with Vault RIM. Over the past two years, the size of the RIM subscription business has doubled. We now have more than 200 RIM customers and great potential as we look ahead.

Clinical is another area of significant strength and opportunity for us. In Q4, we signed our 14th top 20 pharma for eTMF. Our established track record of customer success with Vault eTMF is providing opportunities for additional Veeva clinical applications as customer see the benefit of a unified solution on a world-class cloud platform. For instance, in Q4, an existing top 20 eTMF customers standardized on Vault Study Startup, they are the seventh top 20 pharma to standardize on Study Startup. It's been less than four years since we started expanding our clinical suite beyond eTMF and already a quarter of our eTMF customers have at least one other clinical application. I'm very excited about the growth we're seeing in clinical and the significant runway ahead.

I'm also pleased with our progress in newer Vault products. Safety and CDMS are two of the biggest opportunities that we have on the R&D side and both are showing good early momentum. We have more than a dozen early adopters for safety and more than 60 studies have started on CDMS. These two areas are still small in terms of revenue, but we feel very good about the potential for these products to be market leading over time. This year will be an important one as we build our track record of customer success and continue to innovate in both areas.

Outside life sciences for CPG, chemicals and cosmetics, we had a number of expansions and added some big wins with new companies, including a top 10 CPG company, who will adopt QualityOne, and a top 10 cosmetics company to standardizing on RegulatoryOne. In reflecting on the year for this business and looking ahead, we set the right course in the Veeva Way. We kept our focus on customer success and doing the right things for our early adopters, which is helping establish Veeva as a trusted provider in these new industries.

It was a great informative year for Veeva. We grew and evolved an important new ways. We have a big opportunity ahead and the right team, operating model, technology and focus on execution to fuel our growth well into the future.

With that, I'd like to hand it over to Tim.

Tim Cabral -- Veeva Systems Inc

Thanks, Peter. Q4 was a strong finish to another outstanding year. As a reminder, this is our first quarter with Crossix and Physicians World. And we are providing an additional level of transparency during this call to assist in your understanding of how these acquisitions impacted our results and will contribute to our fiscal 2021 guidance.

Total revenue for the fourth quarter was $312 million, up 34% from $232 million a year ago. Crossix and Physicians World contributed more than $19 million of total revenue in the quarter. Vault was 49% of total revenue versus 52% in Q3. For the year, total revenue was $1,104 million, up from $862 million in fiscal 2019.

Excluding Crossix and Physicians World, total revenue grew 26% year-over-year. For the full-year, Vault represented 51% of total revenue, as compared to 47% in fiscal '19. Subscription revenue in the quarter totaled $254 million, up 33% from $191 million in the prior year. Crossix contributed roughly $14 million of subscription revenue in Q4, which includes the impact of a purchase accounting writedown of nearly $3 million. This contribution from Crossix represented an incremental seven points of growth in the period.

Vault was 47% of subscription revenue versus 49% in Q3. For the full-year, subscription revenue came in at $896 million, up from $694 million in fiscal 2019. Commercial Cloud subscription revenue grew 15%, excluding the impact from Crossix and Vault subscription revenue grew 43%.

In fiscal '20, our revenue retention rate was 121%. This metric is defined in the earnings release and reflects annualized subscription revenue growth within existing customers. Net of revenue attrition and continues to illustrate the increasing value we are providing to our customers and the life sciences industry.

Services revenue came in at $57 million, up 38% from $42 million last year. Excluding Crossix and Physicians World, service revenue grew 25% year-over-year. For the full-year, service revenue totaled $208 million, up from $168 million in fiscal 2019.

Non-GAAP operating income was $103 million, which came in above the high end of our guidance. This result was driven by revenue outperformance offset in part by a couple of million dollars of additional one-time commission expenses for both our core business and the acquired Crossix business. We added 489 net headcount this quarter, including the 384 Crossix and Physicians World employees joining Veeva. Fiscal 2020 ended with a total of 3,501 employees up from 2,553 a year ago.

Moving to the balance sheet, deferred revenue is $469 million, compared to $251 million at the end of the third quarter. Calculated billings for the fourth quarter came in at about $528 million, which includes roughly $9 million of net acquired deferred revenue, less the acquired unbilled receivables. After adjusting for this, calculated billings in the quarter was $519 million ahead of the high end of our guidance. Crossix and Physicians World contributed $35 million to calculated billings in the quarter.

Looking ahead, we expect calculated billings of approximately $330 million for Q1 and $1,500 million for fiscal '21 with 40% to 41% of those billings coming in Q4. 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.

Elsewhere on the balance sheet, we exited Q4 with $1,087 million in cash and short-term investments, down $408 million from the end of Q3. This reduction was mainly driven by the Crossix and Physicians World acquisitions.

In Q4, operating cash flow was $39 million, which includes $11 million in excess tax benefit. For the year, operating cash flow came in at $437 million, including a total of roughly $50 million in excess tax benefit. Excluding the tax benefit, operating cash flow for the year was $387 million above our full-year guidance. We had another strong collections quarter in Q4, including nearly $15 million we had planned to collect in Q1 of fiscal '21. For fiscal '21, we expect operating cash flow to be at least $460 million, excluding the excess tax benefit.

Next, I'd like to share our outlook for Q1 and for the full-year of fiscal '21. For the first quarter, we expect total revenue to be between $327 million and $328 million with services revenue contributing roughly $63 million. We anticipate non-GAAP operating income of $117 million to $118 million and non-GAAP net income per share of $0.59 to $0.60 based on a fully diluted share count of approximately 159 million shares.

Please note, we will maintain our non-GAAP tax rate at 21% for fiscal '21. As a reminder, this rate is not something that we adjust quarterly and we'll evaluate it again next year. For the year, we expect total revenue to be in the range of $1,400 million to $1,405 million, which is an increase from the initial outlook provided on our Q3 earnings call. Within that number, we expect the contribution from Crossix and Physicians World to be between $105 million and $110 million in fiscal 2021. We expect subscription revenue to be roughly $1,145 million for the full-year.

Commercial cloud subscription revenue is expected to be roughly $585 million. Included in that number, we expect Crossix to contribute between $85 million and $87 million of subscription revenue for the year. This number includes the impact of roughly $2.4 million of purchase accounting writedown, which we will see mostly impacting our Q1 results. Vault subscription revenue is expected to be roughly $560 million, representing an increase of approximately 31% year-over-year.

Before moving on, I'd like to provide some additional context for the Vault subscription growth outlook. As we near the end of the Zinc MAPS migration to PromoMats, Commercial Vault to successfully become the market leader and with our strong market share, we expect Commercial Vault growth to slow. Additionally, as we have disclosed throughout the year, fiscal '20s subscription revenue benefited from both favorable booking linearity and a tailwind resulting from the recognition of unbilled revenue from multi-year contracts with ramping fees.

Moving on, we expected non-GAAP operating income of roughly $500 million for the full-year, a non-GAAP operating margin of almost 36%. Finally, we expect non-GAAP net income per share of about $2.50 for the year, based on a fully diluted share count of approximately $160 million.

In summary, the team has done an excellent job delivering another record year. Given our focus on innovation and execution, we continue to be confident in our ability to deliver $3 billion in revenue in calendar 2025.

Thanks for joining the call today. And I'll now turn it over to the operator for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from Ken Wong from Guggenheim Securities. Your line is open.

Ken Wong -- Guggenheim Securities -- Analyst

Great. Great quarter guys and thanks for taking my question. The first thing I want to touch on, I'm sure everyone is following it in the headlines, but obviously the impact of coronavirus and any headwinds you might be seeing in China. I guess, first just -- again, what are you guys maybe directly seeing or projecting. And then second, as it relates to your customer base, how should we think about the impact to their business? Obviously, there's probably maybe some tailwinds as well there and how that might flow through for you guys.

Peter Gassner -- Founder and Chief Executive Officer

All right. This is Peter. I'll take that one. First, our hearts go out to the people, the families that are seriously affected by this and we hope they have a speedy recovery. As it goes to our customers, they're really working hard to try to develop things that will help the situation, vaccines or cures actually for this. And we're helping our customers, where we can, but we know they're working around the clock.

In terms of our business, we haven't seen project slowdowns yet or haven't seen any projects canceled. We've seen a little bit of slowdown as customers adjust to working remotely in some regions, nothing that would be material to our financials. In terms of Veeva, we're in countries that are heavily impacted where we have offices, we've instituted a work from home policy. Now for Veeva that's very normal. We handle video conferencing very well. We grew up as a very virtual company. So I believe we're well positioned to handle this.

One of the things that we're doing, I mentioned on our script is helping the industry by providing free Veeva CRM Engage meeting licenses to our customers up until September. That way they can continue their interactions with the doctors that they need to and they can do that remotely. So in summary, our customers are working hard to provide the medicines here. There's no material impact to our business at this time.

Ken Wong -- Guggenheim Securities -- Analyst

Great. And then maybe a quick follow-up. Just on the competitive landscape, whether it was product or customer engagement, there's a perception that maybe a door was left open, a crack that allowed competitors to maybe sneak a foot in. Any efforts, maybe button up customer outreach, retention efforts to make sure things like that don't happen down the line?

Paul Shawah -- Senior Vice President of Commercial Cloud

Yes. Hey, Ken, this is Paul. I'll take that one. So let me come in at a high level on the competitive -- the overall competitive landscape and then more specifically on what we're doing. The competitive landscape is pretty much similar to what it's been over the last year. Things haven't really changed all that much.

IQVIA is our primary competitor, as you know, there's certainly regional competitors that we have, but they're the ones that are primary in terms of global kind of scope there. IQVIA has continued to be aggressive in terms of how they approach the market in of pricing and bundling. Some of their projects have been a bit more services oriented, instead of standard product. And I think over the short-term that sort of thing could work out. I think over the long-term custom projects are not great.

From Veeva's perspective, we had really great success last year. I'm really proud of what we've accomplished. Peter highlighted that we had 63 net new CRM customers, compared with the year before, where it was 46. So we've grown and we've actually expanded our share last year. And of those wins, most of them came -- most of them were head to head with IQVIA, and many of them were IQVIA replacements. So I'm really proud of what we've accomplished. That's the results. The results, I think, speak for themselves in terms of what we're doing, where -- we think our strategy is the right one, which is focus on product innovation and focus on customer success. So we're innovating within core CRM in many different ways.

And Peter highlighted some of the AI that we're doing. We're also expanding our -- the add-ons and we're innovating a new add-on areas and we'll continue to add new products and then we're relentlessly focused on the customer success side. So that's our strategy to make sure those sorts of things don't happen. I expect at specific accounts there could be factors that lead to a specific decision. But we're doing our best and we're going to continue to focus on innovation and customer success.

Operator

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

Karl Keirstead -- Deutsche Bank -- Analyst

Thank you. I've got two maybe, both for Tim. So Tim, on the Vault subscription revenue growth, I think you closed out fiscal 2020 with 43% growth, a fantastic result. It looks like your guidance is for a decel to 31%. So just given that this is your -- obviously, your growth engine. Do you mind elaborating on the reasons for that Vault slow down? It sounds like it might be a little bit more on the commercial sides. Maybe the clinical trial side is stronger and there's a mix shift going on. But maybe just to start there just to describe what's happening. Thanks.

Tim Cabral -- Veeva Systems Inc

Sure, Karl. Certainly, happy with the momentum of the Vault business and happy with the guidance. To your point in terms of comparing the fiscal 2020 results, and you're correct, 43% was the Vault growth number there versus a 21 guide. A couple things to keep in mind...

Paul Shawah -- Senior Vice President of Commercial Cloud

31%.

Tim Cabral -- Veeva Systems Inc

31%, sorry. I said fiscal '21 and 21% -- 31% guide. A couple of things to keep in mind and you're right, Vault Commercial, as we're nearing the end of the Zinc MAPS migration of PromoMats, we've really become the market leader in Vault commercial. And if this market share, we expect that Commercial Vault's business to slow a bit. But there was also a couple of favorable dynamics in fiscal 2020 that we don't expect to repeat this year.

One is the favorable linearity of bookings and we talked about that through the year fiscal '20. And the second was the tailwinds we saw from the recognition of multi-year ELAs. Again, we don't expect both those dynamics to necessarily happen on a consistent basis and we don't have that in our assumption of the fiscal 2021 guidance. But lastly, I would say, this is consistent with the way that we viewed the Vault business. And this view definitely informed our early fiscal '21 guide that we gave 90 days ago, as well as our $3 billion revenue target in 25.

Karl Keirstead -- Deutsche Bank -- Analyst

Got it, OK. That's helpful, Tim. And then maybe my follow-up is just on the revenue performance in fourth quarter just closed, $312 million relative to your guide of $299 million. That's a 4% beat and that's quite a bit higher than I'm used to seeing with Veeva. So I'm just wondering if you could elaborate on that. It doesn't sound like the upside came from acquisitions. Pete did mention that it was roughly in line. So was there some factor that might have driven sort of more in period revenue upside than you anticipated three months ago? Thanks a lot.

Tim Cabral -- Veeva Systems Inc

Sure. I think it was in part acquisitions. We -- when we gave the guidance last quarter, 90 days ago, we had talked about the contribution from acquisitions being roughly $15 million and that came in a bit higher. Most of that was due to a smaller purchase accounting write-off that we had anticipated, as well as good performance from those businesses. I would say the other part of the beat, Karl was a more normal, stronger execution and stronger bookings in the quarter. And we also saw a little bit more services revenue than we had anticipated 90 days ago. And as we've talked in the past, it's sort of the lumpy part of our business. So those -- that part of the business can move up and down even within a 90 day period.

Karl Keirstead -- Deutsche Bank -- Analyst

Got it, OK. Very helpful on both answers. Thank you, Tim.

Tim Cabral -- Veeva Systems Inc

Thanks, Karl.

Operator

Your next question comes from Saket Kalia from Barclays. Your line is open.

Saket Kalia -- Barclays -- Analyst

Hey, Peter. Hey, Tim. Thanks for taking my questions here. Peter, maybe just to start with you, I think we said that there were about 140 new Vault customers this year that started with one Vault solution. Looking back at sort of the history of that product, can you just talk about how the profile of that initial land has maybe changed with those 140 net new customers versus what you would typically land with them in the past?

Peter Gassner -- Founder and Chief Executive Officer

That's a good question. In terms of the profile of where people start for Development Cloud. I really haven't seen that quite changed much. They would generally start in one area where they have the most need. It will be in the regulatory area, a quality area or a clinical area. I'd say if there's any -- if you look at a shift from maybe four years ago, I think we see a little bit more people starting in the quality area now than we used to, because our quality suite has gotten much broader. We have our QMS product, our QualityDocs products, which was our original one and our training product. So that's maybe a little bit higher, but it hasn't materially changed. They will start in the area where they have the most need. The smallest companies will generally start in either the quality area or the clinical area, because those would be the first needs of the smallest companies.

Saket Kalia -- Barclays -- Analyst

Got it. Got it. And then for my follow-up for maybe you, Tim, maybe on CDMS, can you just remind us how that's priced, as you grow the number of trials here and the size of those trials. Does that directly impact revenue or billings or are those typically part of kind of broader ELA type of agreements?

Peter Gassner -- Founder and Chief Executive Officer

This is Peter. I could jump in on that one. There's no particular pattern that would be applicable to all customers. In general, we're going to start small with a new customer. They're going to try us out in certain areas, a small trial-by-trial small revenue. And that -- it can graduate to an ELA over time, and that takes some time to work through. So there's no particular pattern there. I would say it's actually quite similar also to what we saw in the early days of clinical with Veeva five years ago.

Saket Kalia -- Barclays -- Analyst

Very helpful. Thanks, guys.

Operator

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

Stan Zlotsky -- Morgan Stanley -- Analyst

Perfect. Thank you so much and I apologize for any background noise during this call. A couple of questions from my end. Peter, you mentioned a top 20 pharma win with your clearly data product. Could you give us a little bit more detail on that win? And maybe just at a higher level, could you get us some updates on how your overall data efforts are going? And then I have a quick follow-up for Tim.

Peter Gassner -- Founder and Chief Executive Officer

Yes, this was a pretty standard. It was a top 20 pharma in the US diversified pharma. They're in oncology, many different areas -- therapeutic areas. So their needs for data are quite diverse, because they have to navigate a lot of complex health systems. The health system might be the Mayo Clinic or MD Anderson and all the doctors that are related to there. So they need a robust set of data. They had a set of data provided from a legacy provider and the service just wasn't quite what they wanted and the quality and quantity and expansiveness of the data wasn't quite what they wanted. So we were able to show them a better solution and they're migrating toward it. And that's a project that's long, but not that long, it's less than a year project.

So it's pretty down the middle -- have been replaced. In terms of our data offerings, our OpenData that's -- it's a market where it's country by country. So we're the market leader in China. We're doing a bit quite well in the US here and in Europe. It's earlier for us and we are making progress country by country. So I'd say steady, steady as she goes on OpenData.

Stan Zlotsky -- Morgan Stanley -- Analyst

Okay, perfect. Thank you. And then for Tim, going back to Vault, 31% revenue guidance for fiscal '21. Could you perhaps remind us, how much of a benefit did you see in fiscal '20 from those ramping contracts on the both side, especially, both Clinical Vault R&D. And when you look at fiscal '21, do you expect those benefits to simply not be there or do you expect those benefits to perhaps turn into headwinds as a result of the ramping contract nature of them? Thank you.

Tim Cabral -- Veeva Systems Inc

Sure. So in terms of the fiscal '21 results, it was about a 300 point tailwind for those particular types of deals, Stan, in that dynamic. And you are very astute. It goes from being a tailwind to a headwind. Now to be clear, we still see a lot of opportunity this year around new ELA deals, but the way that ELA deals came in late in fiscal '19 and into '20 really created a growth rate over fiscal '19's results that was a tailwind in '20. That could turn into a slight headwind in '21, but that is included in the guidance that we gave, Stan.

Stan Zlotsky -- Morgan Stanley -- Analyst

Got it. Thank you so much.

Operator

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

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

Hey, guys. Thank you so much for taking my questions. Peter, I wanted to follow-up on the earlier point you brought up about what you're doing with CRM Engage for the regions that are impacted by corona. Maybe just following up a little bit on that, it seems like CRM Engage is obviously really exciting product, but it's obviously a big process change for the industry. I mean, just maybe thinking ahead, is getting it in industry like life sciences that's maybe a little bit more resistant to change to adopt some more solutions like this, even if they're being forced to. Is that something that in your mind, could serve as that trigger point of, OK, they've tried it, maybe because they're forced to, they're used to it. And now that helps maybe accelerate the adoption. Or is there a better way to think about that? And then I've got a follow-up for Tim.

Peter Gassner -- Founder and Chief Executive Officer

Hi, Rishi. I think, you're right. This is going to business process change like this that involves compliance. Sometimes customers can be measured on that and they maybe might not adopt too fast. Now they're being forced to do some things. So I think it will -- we will see a bit faster adoption of Engage as a result of this. So that's the real straight forward answer there.

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

Got it, OK. That's helpful. And then Tim, just going back to the acquisitions, really appreciate all the detail and transparency in terms of this quarter's numbers and next year's outlook. Just wanted to maybe dial into the gross margin implications from the acquisition. So Physicians World, very services-heavy, get that was on gross margin. How do we think about the gross margin implications from Crossix net of the accounting for acquisition? Thanks.

Tim Cabral -- Veeva Systems Inc

Yes. So if you look at our Q4 results, Rishi, and into fiscal '21. I would think that there's roughly -- or we're expecting to be roughly about at 200-ish basis points impact to gross margins from those acquisitions. And as you realize you'll see some of that in our subscription gross margin, where Crossix is the majority of subscription and a little bit of it in our services gross margin, where Physicians World is all services revenue.

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

All right, that's helpful. Thank you.

Operator

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

Bhavan Suri -- William Blair -- Analyst

Hey, guys. Let me [Indecipherable] congrats and thanks for taking my call. I guess, I just wanted to touch a little bit on EDC or CDMS now. When you look at the primary competitor in that space at least the more modern primary competitor taken out by do so. And if I think about 2020 was a very big renewal year for them. As you think about the potential to capture that opportunity, I'd love to get some color on sort of how you're thinking about that market. How you guys are evolving. Because, obviously, with at least one top 20 pharma win in the Phase 3 clinical trial space, you're set up well. So just trying to understand how the business is going to evolve this year and how you're thinking about the opportunity vis-a-vis sort of the competitive being acquired and this being a big renewal year for them?

Peter Gassner -- Founder and Chief Executive Officer

Right. I guess, step back at a high level for Development Cloud, that's our Vault in R&D area. I think it's important to know that, that's a very large area for us and it's very connected. The eTMF and the CTMS connected to the EDC connected to the safety, connected to the regulatory. That's a big broad area for us. And it's very early days. It's less than 10% penetrated. So our goal is to have applications and products that we become the market leader in. And that's where we can be really the trusted partner of the industry over the long-term. Some of them we have quite some progress on and some of them are quite new. CDMS particularly, that's where we're quite new. So we're still early there, 60 trials, that's not that many.

But what we're seeing is we're very well positioned for leadership into the future. It's the product innovation and the customer success we're having. So we're actually being very measured on the projects that we take on right now. We're laser focused on customer success of these projects. We're about to start a very large trial for a customer, multiple, multiple sites around the world, hundreds of sites around the world in multiple countries. We're just laser focused on the customer success.

And then I think the market will take care of itself, because what the customers are looking for is not just CDMS only. They're looking for the whole suite of Development Cloud integrated in together on one common platform. I think it's important to remember that's the vision we started out with back in 2011 and it takes a long time to build that with some serious engineering work. So that's really what we're focused on, we have our eye on that prize. That's the type of thing that gives us confidence in our 2025 goals. So that's really where our focuses of the company is out to that 2025.

Bhavan Suri -- William Blair -- Analyst

Got it. Got it, that's helpful. And then I just wanted to touch on an open-date a little bit. We've talked about this in the past. And there have been some challenges given sort of the competitive environment given sort of the one data asset that was owned by IMS Health, obviously not part of the IQVIA. But it feels like OpenData seems to be doing -- it seems to have been doing better maybe, or maybe it's exceeding maybe our limited expectations from outside.

I'm just trying to understand, has anything changed there? Have you added something to that? Is there -- you talked about data in China. But is there something unique there that sort of helping that business maybe see a little more growth than it has in the past. How should we think about that going forward both from network and from KOL and the other pieces of that business?

Peter Gassner -- Founder and Chief Executive Officer

I think the story of OpenData is just a superior data product. And we just buckling down year-after-year and improving that data product, improving that service and having the OpenData use policy that we have IMS or IQVIA has very restrictive policies that customers don't like. So that's all to the pro, and that's why we're seeing some new customers.

To the con, OpenData is also affected by the IQVIA anticompetitive policies. So when customers want to match our OpenData with other IQVIA products, they're prevented from doing that. Therefore, it impacts our OpenData sales. Make no mistake, our OpenData sales would be significantly better without these anticompetitive products. And what's causing us to win is just the product superiority. And what's causing the tailwinds is this antitrust issue, which we're progressing well. We have about two more years until the trial, and that's a jury trial. We feel confident in our outcome, but there's no guarantee. But at least two years, it's pretty defined timeframe here, and we're hoping to get the right verdict.

Also, I would say thanks to the customers. I'd just call out the customers. Thanks to the customers who largely finished the depositions in the case. And there were six customers that testified about the anticompetitive tactics of IQVIA harming the industry. So we're really grateful to those customers and their testimony.

Bhavan Suri -- William Blair -- Analyst

Thanks. Just a follow-up with that, just thinking about the customers, but thank you for taking my questions.

Peter Gassner -- Founder and Chief Executive Officer

I was reading your mind. I think that's OK in these types of situations.

Bhavan Suri -- William Blair -- Analyst

That's OK.

Operator

Your next question comes from Sterling Auty from J.P. Morgan. Your line is open.

Sterling Auty -- JPMorgan -- Analyst

Yes, thanks. Hi guys. So in looking at both the Vault growth in the quarter and the outlook, can you help us understand how much of that Vault growth is coming from adding additional products, because I think you mentioned the average is now between 2 million and 3 million versus adding more Vaults in cases where it's not an ELA versus new customers?

Peter Gassner -- Founder and Chief Executive Officer

That -- I don't have the exact math on that. I think it's -- I would guess it's roughly even, maybe skewed a little bit more to customers adding new Vaults. Why do I say that? Clinical is a big area. Regulatory is a big area, and quality is a big area. So we have three big areas that are sort of in their prime now. We have other very large areas that are not yet in their prime they are very early, such as safety and CDMS. So the three areas that are in their prime in the Development Cloud. And then within each Development Cloud, we have two or three major applications. So on average, it's going to be a mix of adding new applications into a Vault and new Vaults. And maybe to simplify, I guess, Sterling, I would say that's a 50-50 mix there, but we don't have that exact number for you at this time.

Sterling Auty -- JPMorgan -- Analyst

Got you. And then one follow-up. Just to remind, where are you -- Tim, we love having you on these calls and would want to keep you forever. But where are you in terms of that process?

Peter Gassner -- Founder and Chief Executive Officer

Yes, Tim and I are working on -- Sterling Tim and I are working on the search, and that's going well. I think it's important to remember that Tim is here until we can find the right successor and also through the transition. So there's no defined transition period. We're focused on finding the right person over the long-term, and we're seeing some good candidates.

Sterling Auty -- JPMorgan -- Analyst

Sounds good. Thank you.

Operator

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

Sandy Draper -- SunTrust -- Analyst

Thanks so much. I guess just a follow-up to Sterling's question. Pete, if you can maybe talk a little bit about the two top 20 RIM customers. Where -- are they coming from similar backgrounds, both from eTMF, new to Vaults? Just sort of some context about the two top 20s that joined on RIM.

Peter Gassner -- Founder and Chief Executive Officer

Actually, one was -- Sandy, one was a top 20 and the other one was a top 50, so just to be accurate on that one. The specifics of these, actually, both of them are headquarters in Europe. Now that's -- I wouldn't read any particular pattern into that, but they happen to be both European-based. Both of these, actually, I would say, quite early on in their journey with Vault. I don't -- they're early on, but I believe both of these have made an emotional commitment to the full Development Cloud suite. Now that emotional commitment is much different than purchasing-type equipment -- commitment, meaning they're starting in regulatory, I believe I don't have the exact specifics, but I think that's the first application. But both of these customers evaluated the Development Cloud holistically, evaluated the concept of having Development Cloud holistically, actually before they bought our first application.

Sandy Draper -- SunTrust -- Analyst

Okay, great. That's really helpful.

Peter Gassner -- Founder and Chief Executive Officer

Sandy, it doesn't always happen that way. Sometimes, there will be a particular need in a customer and they want to solve that need, and they will solve it before evaluating the full picture Development Cloud. And some other customers will be more measured and evaluate the full Development Cloud first before solving a specific area.

Sandy Draper -- SunTrust -- Analyst

Okay. Yes, that makes a lot of sense. And the follow-up, my ears perked up when you talked about Crossix and talked about being transformative. I haven't had a chance to go back and search all transcripts to see if you've used that word before with that acquisition. And I'm just thinking back in early days, Vault certainly turned out to be transformative for the business. Just some -- when you use that word, is it relative to the opportunity for that business, the opportunity to transform your existing products? I just using that word, just really would love to get some more thought behind what you see when you talk about being transformative. Thanks.

Peter Gassner -- Founder and Chief Executive Officer

Yes. It's very astute to see that. I use that word carefully, because we've now worked with the Crossix team hand-in-hand, day and day, hour and hour over the last 90 days. And that is how I feel about it. It's transformative. The cultural synergy is there, the product synergy, the innovation synergy. Their expertise around data and privacy and patient data is unparalleled. So I do think it's very similar about like Vault. Now much earlier stage, right, I might have talked to you about transformative potential involved in 2013, that type of thing. I might have talked about the potential to be transformative or 2014. So it's early days. Of course, when things are earlier, it's not as guaranteed how everything is going to work out, but it has the potential to be transformative.

Sandy Draper -- SunTrust -- Analyst

Okay, great...

Peter Gassner -- Founder and Chief Executive Officer

Transformative, meaning bringing us into new markets, changing the DNA of Veeva, changing what we look like by 2025.

Sandy Draper -- SunTrust -- Analyst

Got it.

Operator

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

David Hynes -- Canaccord -- Analyst

Hey, thanks very much. Congrats on the results. Pete, I want to ask one on the R&D suite. I think we have a pretty good idea of how your CDMS relationships can potentially scale to be pretty large overtime. I have less of a feel for how material your customer relationships and safety might be. So can you just try and frame that for me? And are those relationships where you start small and then scale like CDMS? Or do you typically land a little bit larger in safety?

Peter Gassner -- Founder and Chief Executive Officer

In safety, in general, what we're seeing right now is we actually land smaller than we do in CDMS. Because they're generally there, the revenue goes with the amount of safety case incidents the customer has. So right now, we're getting into quite small companies that have a low volume of safety cases. And this is also an area, I would say, in the safety area, where customers are very measured in their approach, very, very measured. So I think we'll go broad and small. It will be probably not jumping in the way of ELAs, things like that, that CDMS does. But it's very similar in its market size like CDMS, and it's very similar in that safety is needed by a very small company.

As soon as you're starting to do a clinical trial, as soon as you have a medicine that's given to a human, you're going to need it. You're going to need a safety system. So in that way, CDMS and safety are parallel, but CDMS is revenue based starts up based on the trial versus safety is based on the number of safety incidents that happen. So it's a little bit different profile.

David Hynes -- Canaccord -- Analyst

Okay. Yes, that's helpful. And then second...

Peter Gassner -- Founder and Chief Executive Officer

The other similarity, I would say too is, it's just these are areas. Safety is an area where there has been really not much innovation over the last years, I would say, even less so than CDMS in terms of innovation. So we feel quite confident in our approach. Also, safety has a tremendous amount of integrations to the rest of the Development Cloud. So if a customer is using our, let's say, our CTMS system or our CDMS system, there's a tremendous benefit of getting our safety system and then not having to build and maintain the integrations. So I think that will give us an advantage overtime as well. That's just going to take a while to play out.

David Hynes -- Canaccord -- Analyst

Sure, that makes sense. And then a bit of a hypothetical for a second question, but obviously, healthcare is a hot button political topic. And since it's Super Tuesday, figured out I ask the question along those lines. If there are attempts to rein in drug pricing, right, be it narrative or actual policy? And industry margins were to come under pressure, how do you think that impacts your customers' engagement with Veeva?

Paul Shawah -- Senior Vice President of Commercial Cloud

Yes. Hey this is Paul, David. Thanks for the question. So clearly, good timing as we're approaching the election season in the US. I think our customers certainly think about this. I don't think they over think. When we talk to some of our customers about this exact issue, there -- our customers are global. Veeva is global. The US is one market. There's regulatory changes that happen in every market all the time. And typically, no one market really drives the overall business. So I think although there's concern and they're thinking about it, I think the impact may end up being slightly muted.

And I think there's also a potential impact that where there's pressure on pricing, I think the other balancing side of that is increased access. When you may increase volume, you may reduce overall unit pricing, the impact may be net slightly negative. But I think there's thinking about that side of it as well. So I think our customers are being balanced and not being too overly really concern when they think about that. But this is all, I think you said it's hypothetical. We're projecting as much as you are on it.

David Hynes -- Canaccord -- Analyst

Not surely. That's helpful. Thanks, guys.

Operator

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

Tom Roderick -- Stifel -- Analyst

Gentlemen, thank you for taking my questions. Congratulations on a nice finish to a great year. I know there's not a lot of precedence to this. But Peter, you've been here since the beginning, and many of your team has been as well. As you think about sort of the response from the life science community to what we're facing with the coronavirus issues going on around the world I don't know what the right precedent is. Maybe you take yourself all the way back to when H1N1 was a topic in the community.

How do you think the life sciences companies in the world and your customers sort of play this out as we go forward? Certainly, some will put more money toward R&D and search for a vaccine. Historically, does this result in a bump to R&D spend? And can that be a good thing? Can you just kind of take us through the longer-term, the mid-term impact of what we might be facing here?

Peter Gassner -- Founder and Chief Executive Officer

I think it's still early days in coronavirus. So any kind of a long-term prediction could be inaccurate, because I don't think we -- nobody knows exactly what the situation is going to be six months from now. My personal belief is this underscores the importance of core research and development in life sciences and how important of an industry this is for the world, right. So I think, overall, it will potentially attract people into the life sciences industry and potentially have a greater appreciation of the life sciences industry, especially as we're moving into precision medicine, which is the other revolution that's happening in life sciences, the ability to specifically target or repair a very specific disease, a very specific gene. So it's really a golden time for life sciences. And maybe coronavirus, in its own way, will shine a spotlight. I certainly hope one of our customers can develop a vaccine or a cure for coronavirus. And I think that will be a shot in the arm for the industry and really underscore the importance of this industry.

Tom Roderick -- Stifel -- Analyst

Fair enough. That's really helpful. I appreciate that. And for my second question, let me just kind of turn to outside of life sciences. You focused on three particular market segments or industries that you've had some success in. Can you speak to what some of the customer feedback has been as you look at CPG and cosmetics and chemicals? How are they finding success with relation to the products that you're putting into market there? And do you kind of look at some additional verticals where you might find some additional success in 2020? Or should we kind of continue to focus on these three specific verticals as we think of outside life sciences this year? Thanks.

Peter Gassner -- Founder and Chief Executive Officer

Yes. For outside of life sciences, we're focusing on the CPG, cosmetics and chemicals. And within that, we're focusing on our Quality products, QualityOne; and our Regulatory products, RegulatoryOne. Customer feedback is consistent. They like our platform. They like our applications, and they like our long-term partnership approach. We don't feel like a vendor to them. We're focused on their success, and we're always thinking long-term and what we can do. So they like that. They like the fact that we are a company that knows how to handle large global customers. We're very adept at that, and they feel that. So that's a customer success type of feeling that we're creating and we're happy with that business. The growth there is steady and the customer success is good. In terms of new verticals, that's not something we're looking to do at this time this year, we're still early in those verticals that we targeted. So we're going to buckle down there and focus on the customer success.

Tom Roderick -- Stifel -- Analyst

Outstanding, thanks for your help, appreciated.

Peter Gassner -- Founder and Chief Executive Officer

Thanks.

Operator

Your next question comes from Brad Sills from Bank of America Securities. Your line is open.

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

Hey guys, thanks for taking my question. Just wanted to ask about CDMS. I think it was last quarter, you had your first Phase 3 trial win in the top 50. Are there more deals like that in the pipeline? Do you need more deals like that when you refer to your kind of very measured reference selling approach there? Is that the validation that you need in that market where you could start to see that tipping point in a replacement cycle in clinical? Just remind us kind of where we are in terms of reference selling and maybe even road map, maybe there's something coming with -- on the road map that could be a catalyst for that business. Thank you.

Peter Gassner -- Founder and Chief Executive Officer

Yes. CDMS, remember, it's early. It's quite early, 60 trials. We're starting a major Phase 3 trial. We've done Phase 3 trials before. So we've done a number of them. But what we were referring to last quarter is we're starting a major Phase 3 trial with a large company, one of the largest trials they've ever done. First patient in here for those types of things, I think, for that trial is going to be in a matter of weeks. So that's really where our focus is. There's a lot of momentum in the market. We're being very measured in how many customers we take on and that type of thing.

And it's not to do actually with a product feature or anything that's going to unlock the market. But it's more as we get more of these large trials and enrolled and as we scale up our services support team and round out all the product features, that's when it's really going to happen. It's a reference selling model. So at some point in the future, I'm hoping we have a customer summit and a customer says, hey, yes, all our new trials, we put them on Veeva and we've been running them for two years, and we're super happy. And these are the benefits we're seeing. That's when it really starts to flow. So it's a long-term game.

We mentioned our commercial Vault. We have to remember, that was 2011 when we sold our first commercial Vault application, PromoMats. And roughly 10 years later there, we're in a real leadership position in terms of the market. CDMS takes a while, but I feel very confident in our position. Also, interestingly enough, since we started CDMS, since we announced it, there has actually not been a new entrant to the market. So I feel we have a good advantage. We have a leading cloud platform, and we have a good head start here. I don't feel like we're competing with somebody. I just feel like we really have to focus on the customer success, and then things will turn out quite well for us.

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

Thanks, Peter. And one more, if I may, just in outside life sciences, I guess where are you in terms of building out the sales force to go-to-market. Those are obviously different verticals with a different domain expertise and go-to-market. You guys have been very kind of steady in building references ahead of building out a sales organization. I guess where are you in kind of your build-out of go-to-market in those three other verticals? Thank you.

Peter Gassner -- Founder and Chief Executive Officer

Outside of life sciences, yes, we're -- I would say the way to characterize that is we're going to -- it's going to be a steady grower for us. And you won't see any type of a burst in terms of expenses, right? We'll be measured in the growth of our field, and that will roughly align. Actually, I think the growth of our revenue will outpace the growth of our expenses in -- outside of life sciences. So it's steady as she goes. We're finding our group inside particularly actually inside CPG and cosmetics, regulatory and quality; chemical is a little bit, you know, of the three chemicals, I would guess, it's not as far as ahead of the other two. But -- so you're going to see nothing dramatic outside of life sciences from us, just steady growth.

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

Thanks, Peter.

Operator

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

Chris Merwin -- Goldman Sachs -- Analyst

Hey, thanks very much for taking my question. I just noticed for Commercial Cloud, it looks like customer growth accelerated really nicely there in 2020. And I know you called out a big customer win in SMB. So I was wondering if you could just talk a bit more about the improving traction that you're seeing in that customer segment and how also we should think about the runway there. Thanks.

Paul Shawah -- Senior Vice President of Commercial Cloud

Yes. This is Paul. Thanks, Chris. SMB was one of the really significant drivers for us. We had a really strong year last year in Commercial Cloud overall, and SMB was one of those big drivers. And I think part of that is just the approvals that have been happening. If you look at the European market, the US market, the FDA, the number of approvals has been quite high, and we are winning the majority of those. So we're driving -- fortunately, we're in a position where those companies, they want to innovate. They want to do things differently. They need to have a very successful launch. They want to launch, in many ways, in a digital way.

So they look to Veeva as their choice. So the number of approvals has driven some of that strength, hopefully that will continue in the life science space for many more years. What we've also seen is the breadth of what they buy from Veeva, some small and medium sized customers come to Veeva looking for a CRM system and what they end up with is something much larger and much more significant than that, because they learn more about what is possible with Veeva and more broadly in Commercial Cloud. So that has driven some of the strengths that you've seen over the last, really over the last couple of years, but in particular last year a particular strength in the SMB segment.

Chris Merwin -- Goldman Sachs -- Analyst

Got it. Thanks very much.

Operator

We're out of the time for questions today. I would now like to turn the call over to Veeva's CEO, Peter Gassner for closing remarks.

Peter Gassner -- Founder and Chief Executive Officer

Thanks again for your time today, and thanks again to the team for all the work for the customer success and for the industry, trust and partnership that you're developing. I look forward to connecting with many of you all virtually at Morgan Stanley Conference tomorrow. Thanks everyone.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Rick Lund -- Head of Investor Relations

Peter Gassner -- Founder and Chief Executive Officer

Tim Cabral -- Veeva Systems Inc

Paul Shawah -- Senior Vice President of Commercial Cloud

Ken Wong -- Guggenheim Securities -- Analyst

Karl Keirstead -- Deutsche Bank -- Analyst

Saket Kalia -- Barclays -- Analyst

Stan Zlotsky -- Morgan Stanley -- Analyst

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

Bhavan Suri -- William Blair -- Analyst

Sterling Auty -- JPMorgan -- Analyst

Sandy Draper -- SunTrust -- Analyst

David Hynes -- Canaccord -- Analyst

Tom Roderick -- Stifel -- Analyst

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

Chris Merwin -- Goldman Sachs -- Analyst

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