Veeva Systems (VEEV) Q4 2021 Earnings Call Transcript

Veeva Systems (VEEV -0.29%)
Q4 2021 Earnings Call
Mar 02, 2021, 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 Systems' fourth-quarter and full fiscal year 2021 results conference call. [Operator instructions] I'd now like to hand the conference over to your speaker today, Mr. Ato Garrett, senior director of investor relations. Please go ahead.

Ato Garrett -- Senior Director of Investor Relations

Good afternoon, and welcome to Veeva's fiscal 2021 fourth-quarter and full-year earnings call for the quarter and year ended January 31, 2021. With me on today's call are Peter Gassner, our chief executive officer; Paul Shawah, EVP Strategy; and Brent Bowman, our chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, our strategies and 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, including those related to the impact of COVID-19 on our business, the life sciences industry and global economic conditions.

Our actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q, which is available on the company's website at www.veeva.com under the Investors section and on the SEC's website at www.sec.gov. Forward-looking statements made during the call are being made as of today, March 2, 2021, based on the facts available to us today. 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 statement. We will provide guidance on today's call but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. The guidance we will provide today is in part based on our current assumptions as to the macroeconomic environment in which we will be operating in the future, including the timing and pace of recovery from any negative effect caused by COVID-19. Such matters that are beyond our control and our assumptions may not be correct and may change rapidly.

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 and in the supplemental investor presentation, both of which are available on our website. A reconciliation can also be found as an exhibit to Form 8-K filed with the SEC just before this call. With that, thank you for joining us, and I'll turn it over to Peter.

Peter Gassner -- Chief Executive Officer

Thank you, Ato. First, I'd like to thank our life sciences customers for their incredible efforts over the last year. The COVID-19 genome was only sequenced about a year ago, and we now already have safe and effective vaccines, diagnostics and therapies. That's just amazing speed.

COVID-19 was also disruptive to the healthcare systems overall, and the industry really stepped up to support doctors and patients around the world. 2020 was a transformational year for life sciences and for Veeva. The scale and speed of innovation from the Veeva team enabled the industry to adapt quickly and work in new ways. Thanks to the team for your outstanding execution against our important mission.

Turning to our results. Veeva delivered exceptional performance for the quarter and year. Total revenue was 397 million, up 27% year over year. Subscription revenue also grew 27% year over year, and non-GAAP operating margin was 39%.

Our full fiscal year revenue was 1.46 billion, up 33% year over year and subscription revenue was 1.18 billion, up 32% year over year. In commercial, we further extended our leadership position with commercial cloud customer growth and the development of important new products that will set us up for future growth over the long term. In Q4, we had 17 new customer wins for core CRM and a number of international expansions with existing enterprise accounts. It was also a standout quarter for Veeva CRM Engage as customers move to paid subscriptions at the end of the 2023 period.

We are pleased with the adoption of Engage and expect high attach rates with new customers as they look to digital capabilities to drive field efficiency. I'm also very pleased with the progress in Veeva Data Cloud. In Q4, we released patient data for the U.S. And now, have five early adopter customers.

We are also previewing our data with other customers, and the feedback is encouraging. In multiple cases, we are able to identify patients and prescribers that were not available in their existing data sets. Looking ahead, we expect to have prescriber and sales data available for the U.S. by the end of the year.

Offerings for additional countries will come over time. It's early days, but we're excited about the potential of Veeva Data Cloud to help the industry in an area that's been stagnant for too long. Having great data, software and business consulting is allowing us to build deeper partnerships with the industry. We're starting to see increasing interest among biotechs to go all in with Veeva, partnering with us from the very start to define and operationalize a digital-first commercial strategy.

In Q4, we had a second biotech in the U.S. go all in with us in this way. To put the breadth of our full offering in context, core CRM is roughly 20% of the opportunity when a customer goes all in with commercial cloud in the U.S. There is a major long-term potential for Veeva in commercial if we execute well on our vision.

This year, our focus is to continue to innovate in our products and optimize our delivery and support for this approach by partnering deeply with a handful of early adopters. As we look back on the year, I'd also like to share that two acquisitions we made about 18 months ago, Crossix and Physicians World, are integrated and operating well. We further invested in Crossix, growing the team by more than 50% since acquisition. The growth is mostly in the data science area as we expand the Crossix data platform.

Our event services business, that was Physicians World, made a quick pivot when the pandemic hit and has been helping lead the industry in digital events. We expect these new businesses to continue to thrive growing roughly in line with Veeva overall in the year ahead. On the R&D side, we had another great quarter across the board with wins and go-lives in clinical, quality, regulatory and safety. The industry is starting to really appreciate the power of Vault Development Cloud to streamline drug development end to end.

We closed the year with more than 850 Vault customers overall. Quality and regulatory had a record number of wins in the year. The Vault RIM and Vault quality suites are adding significant value to the industry and is the only offerings that can truly unify these important functions. It was also a big year for clinical.

One major milestone was involved CDMS. In 2016, we set out to build a better EDC, the first product in CDMS, and we believe we are now there. Vault EDC allows customers to build and execute studies more quickly than before and get access to crucial trial data faster. The impact on our customers' trial speed and agility has been significant, and the industry is starting to take notice.

In fact, we just announced that six of the top seven CROs have joined the Vault CDMS partner program which is further validation of the strength of Vault CDMS. Having a critical mass of CRO partners will make it easier for smaller customers to use Vault CDMS because they often leverage the technology provided by their CRO partner. We've also made excellent progress with Veeva clinical network to connect sites, patients and sponsors. This is a bold vision for the industry that over time has the potential to make trials 25% faster at 25% less cost.

It's still early days for clinical network, but we have the key building blocks in place. We have seven customers signed up, and the first few customers just went live with their first site on Site Connect, which is our first clinical network application. Site Connect links sponsors in the clinical research sites together to make study start-up and study execution faster and more compliant. MyVeeva for patients is another important part of the clinical network.

The first application in MyVeeva for patients is e-consent, and we're already working with a few early adopters. In fact, we had our very first patient used MyVeeva to sign an electronic consent form last Friday. That's a big milestone for clinical network. We are really excited about having patients use Veeva applications directly.

Overall, it's been great to see so much progress, innovation and exceptional execution across the board in commercial and R&D. Looking outside of life sciences, we had another solid quarter with new customer wins and expansions in consumer goods and chemicals. In Q4, a top 20 nutrition company selected RegulatoryOne. Despite cohort-related disruption and a significant downturn in the cosmetics industry, we had a good year overall outside of life sciences with revenue over 30 million as expected.

Before we close, I wanted to share that in February, Veeva officially became a public benefit corporation. Our proposal passed by an overwhelming majority vote. Thank you to our shareholders for your support in this important decision. This move was about the future of Veeva over the decades to come and ensuring the company continues to operate in consideration of all stakeholders.

But we are also seeing a positive effect right now in attracting talent to Veeva and in deepening our customer relationships. I also posted a media article with my personal perspective on the importance of public benefit corporations more broadly. In all, it was a year of exceptional innovation and execution across the board. We're in a stronger position than ever with the right team, customers, products and vision to fuel our growth to 2025 and beyond.

I'll now turn it over to Brent to discuss the details of our financial performance.

Brent Bowman -- Chief Financial Officer

Thanks, Peter. The fourth quarter was a great close to another year of outstanding execution for Veeva. We had record bookings in the quarter, driven by our continued momentum across our development cloud product suites and Veeva CRM Engage. Development cloud performed extremely well with a record bookings quarter, including particular strength in CTMS and QMS.

In commercial cloud, core CRM and add-on products drove our bookings performance in the quarter. Engage conversions were extremely strong, and we believe captured roughly 60% of the total dollar opportunity. This will be a tailwind to our fiscal year '22 commercial cloud subscription revenue. We expect Engage subscription revenue growth after fiscal year '22 will be similar to other CRM add-ons.

Crossix had a strong bookings quarter and posted $79 million in subscription revenue for the year. Total revenue for Crossix and Physicians World was 103 million, with Physicians World benefiting from growth in virtual events in the second half of the year. These acquired businesses are fully integrated into our financial results, and we will not break them out in the future. Strong subscription bookings, including engage strength and services demand led to calculated billings of 688 million, which is 48 million above guidance.

Total billings include 15 million from changes in billing terms at a few large customers, which was 5 million above our previous expectation for Q4. Our revenue retention rate for the year was 124%. 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 industries we serve. We had another strong quarter of hiring.

We end the quarter with 4,506 employees, a net gain of 202 from the previous quarter. For the year, we added more than 1,000 net new employees, the vast majority of which were in our field and product development teams. Fourth-quarter operating margin was 38.6%, which exceeded guidance. Operating margin was driven by subscription revenue outperformance and a smaller than expected seasonal dip in our professional services business.

As a reminder, our operating margin includes roughly a 250-basis-point benefit from cost savings related to lower travel and event expenses, which was in line with the previous quarter. Operating cash flow for fiscal year '21, excluding the excess tax benefit, was 471 million, which is below our guidance. Approximately 30 million of expected Q4 collections pushed to Q1 and were collected in the quarter. I'll now provide guidance for the first quarter and fiscal year '22.

For Q1, we expect total revenue between 408 and 410 million, with subscription revenue of roughly 330 million. We expect non-GAAP operating income for the first quarter between 157 and 159 million. This includes a benefit from reduced travel and events similar to the past three quarters. Note that we have made some changes to our fiscal year '22 sales compensation plan as we do from time to time.

These changes will result in approximately 3 million in incremental expense in Q1 and approximately 11 million for the full year. Q1 non-GAAP EPS is projected to be $0.77 to $0.78 based on a diluted share count of approximately 162 million. Please note that we are maintaining our non-GAAP tax rate at 21% for fiscal year '22 and we'll monitor this assumption for significant events, including any relevant tax law changes. We expect calculated billings of roughly 392 million in Q1, which implies year-over-year growth of about 17%.

This reflects approximately 4 million of billings that moved into Q4 from Q1 related to the changes in billing terms we mentioned earlier. If we account for this dynamic, our normalized Q1 billings growth would be closer to 19%. 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 quarterly billings growth 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 year are better indicators of our momentum. Turning to our guidance for the full fiscal year '22. We expect total revenue of 1,755,000,000 to 1,765,000,000, a 45 million increase to the high end of our prior guidance. We expect subscription revenue of approximately 1.430 billion, consisting of Vault subscription revenue of roughly 750 million and commercial cloud of roughly 680 million.

We expect non-GAAP operating income of about 655 million. Investing for growth is a priority for the year. Our guidance reflects investments with new data suppliers for our data cloud products and additional hiring, primarily in our field and product development teams. We expect travel- and event-related expenses to start to increase in the back half of the year.

We expect calculated billings of approximately 1.870 billion, which reflects a 17% year-over-year growth rate. If we adjust for changes in customer billing terms in fiscal year '21, which totaled approximately 17 million, our guidance will imply normalized billings growth of roughly 18%. We expect about 42% of full-year billings to be in Q4. We expect non-GAAP EPS for the full year of approximately $3.20 based on a fully diluted share count of approximately 163 million.

Finally, we expect full-year cash flow from operations, excluding the excess tax benefit of about 635 million. In closing, I'm very happy with our strong momentum exiting the fourth quarter and the growth we expect in the coming year. We are well positioned to achieve our 2025 target of 3 billion in revenue. Thanks for joining us today.

And now, I'll turn it over to the operator for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question will be from Ken Wong of Guggenheim. Please go ahead.

Ken Wong -- Guggenheim Securities -- Analyst

Great. Thanks for taking my question, and fantastic quarter, guys. This one's for you, Peter. So, can you maybe give us a little bit of feedback from what you're hearing from customers on this transition to a PBC? And then perhaps and more importantly, you've been pretty public with your call to arms for other industry leaders to follow your lead.

What kind of feedback are you getting from other executives, within life sciences and perhaps even outside on this potential change to a public benefit corporation?

Peter Gassner -- Chief Executive Officer

Ken, thanks for the excellent question. For customers, it's helping. It's a discussion starter and then also is a very concrete way to say what Veeva is all about, not just because we're saying it because we wrote it in our charter that we're committed to the industry, to society and to our employees, not just to our shareholders, so they can depend on Veeva long term, and it's absolutely helping. It's also helping in recruiting.

We have people -- a number of people seeking us out, and they want to be part of that. So I would say there's unexpected, also things that's happening. I think it's helping us generate new ideas. It's exposing us to a different ecosystem of ideas that will be positive for Veeva in the long term.

In terms of other companies, certainly have had -- reach out from others, and they're interested in it. I think rightfully so, this is a board decision, the PBC matter. So, this is something that plays out over, over years, really. This is not a snap decision, and it may be other -- right for other companies to be PBCs and it may not be right for them.

So, I try to stay neutral on that and just provide whatever advice and guidance I can about how it fits for Veeva.

Ken Wong -- Guggenheim Securities -- Analyst

Got it. Fantastic. And if it makes you feel better, we've been hearing it from investors that it's positive and also have had other companies that we follow actually reach out to get some color on kind of what you guys are doing and what that could potentially entail from a benefit perspective.

Peter Gassner -- Chief Executive Officer

Excellent.

Ken Wong -- Guggenheim Securities -- Analyst

And so as a follow-up for Brent. Just wanted to touch on the commercial cloud growth. You've called out 680 million. It looks like that's kind of a mid-teens growth rate.

I think a lot of us were expecting bit of a decel there with you guys highlighting a potential cut in pharma sales reps last quarter. Can you maybe walk us through some of the assumptions that are in there? And is there any seasonality we should be aware of to the extent that there are going to be some reductions in sales reps and how that might feather into outlook?

Paul Shawah -- Executive Vice President, Commercial Strategy

So why don't I take the first part about the headcount reductions, and then I'll let Brent answer the question about billings and impact on the financials. So, from a headcount perspective, we first talked about that last quarter. So, we know a little bit more now. We said we believe it was about a 10% reduction that will happen about over the next year or so.

We still think that's going to happen. We think it will happen likely over the next one to two years. But so far, we haven't seen the reductions happen broadly across the industry. It hasn't been industrywide reductions that we've seen in Q4.

There's always ups and downs. It's a little bit up and a little bit down as companies shift. But there has not yet been anything that's been unusual or out of the ordinary. Now, having said that, why do we still believe it's going to happen? The context is important here that the industry has moved to digital.

We have -- we help the industry become more digital. You heard that in Brent's prepared remarks where we have now about 60% of market share from an Engage standpoint, the industry's using that. That will make the industry more efficient. It will make them more effective and productive.

They would now have the opportunity to apply those efficiency gains to either reach more customers or to have reductions in the field force. And I think pharma is thinking about what's -- how do they optimize for that. And that takes time. So, we haven't seen the impact yet, but I do think that will play out.

And we have included those reductions in that thinking within our guidance as well.

Brent Bowman -- Chief Financial Officer

Yeah. And maybe I could add. In the 13% growth that we guided to, we did see broad strength across the portfolio. So, Crossix, this core CRM and core CRM add-ons.

We did have a pop in engage, so that's probably the one item that would -- it flowed through our Q4 billings, and you'll see that flow through revenue through fiscal year '22. And then, beyond that, we expect Engage to grow more in line with other traditional add-ons.

Ken Wong -- Guggenheim Securities -- Analyst

Great. Thanks for the color, guys.

Operator

Our next question will come from the line of Brian Peterson of Raymond James. Please go ahead.

Brian Peterson -- Raymond James -- Analyst

Yeah. Thanks for taking my question. I kind of wanted to follow-up on that, just to clarify. So, Engage, how do you think about the long-term penetration potential of that? I think I just heard 60% market share.

Is that of the total reps? Is that penetration? I just want to make sure I understand the stats that you're giving and maybe what is the longer-term kind of penetration potential that you see of that offering?

Brent Bowman -- Chief Financial Officer

Yeah. So, you're right. It's the -- the 60% is the total Engage opportunity. So, as we think it's not as a percentage of the CRM seats that we have, it's of the total market for Engage.

So, that happened relatively quickly over the course of the last year. We were there for the industry with the right products and technology and expertise to move the industry quickly. We'll see that impact hit our revenue, as Brent mentioned, largely this fiscal year. And then, beyond that, we'll see it grow more like a steady growing out, so most of the pop that we have seen has already hit in this current year.

And then, beyond that, I think it will see steady growth. And it may approach certainly that similar attach rate to what we talked about with closer marketing and with approved email, which are a bit higher than where we're at, with 60%.

Brian Peterson -- Raymond James -- Analyst

OK. And I just wanted to hit on the 17 new wins for the core CRM. Obviously, you guys have a pretty significant market share leadership position there. Just to be curious, if you had to take a step back and think about the results for the core CRM this year, how did that perform versus your expectations? And any thoughts on competitive dynamics in that space?

Paul Shawah -- Executive Vice President, Commercial Strategy

Yeah, thanks. I can cover that also. So, yeah, you're right. I mean, last quarter, we had 19 CRM wins.

That was a record. This quarter, we had 17 CRM wins. And as we look across those, there are -- many of them are pre-commercial companies, a lot of them in the U.S. market.

We are also seeing wins in Europe. But then even in some of the domestic markets like in Brazil, and in Japan. So, we're pleased with that. We're winning those deals.

In terms of the overall competitive landscape, we're gaining share. We've gained share quarter over quarter. We've gained share year over year. And there's a reason for that.

The reason we're gaining share is because, particularly in really difficult times like we're operating in, companies are looking for a partner they can trust. They want a partner that can execute. This is all about execution, right? You have field people that need to be productive in the field. They need a partner that they can trust.

They also want a partner that can innovate with them and we've proven that. And they're also looking for somebody who has the domain expertise and the guidance to get them through the digital transformation. And that's what we've been doing over the last year. So from a competitive standpoint, our position has actually improved over the last year because it's really shone a light on the difference between how Veeva's operating and how rest of the others -- other alternatives in the market appear.

So, really happy with progress from a competitive standpoint.

Brian Peterson -- Raymond James -- Analyst

Good to hear. Congrats on a strong quarter, guys.

Operator

Your next question will come from Brad Sills of Bank of America. Please go ahead.

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

Oh, great. Thanks guys so much for taking my question and congratulations on a nice finish to the year. I wanted to ask about the comments made earlier, Peter, on core CRM, only 20% penetrated in the overall commercial potential. Are there certain products or offerings that perhaps are further out, when you think about getting to 100% over time? Near term, obviously, Engage is doing well.

There're still some wins that you're executing on -- new customer wins. But when we look further out, maybe two, three years from now, maybe something that's on the road map that we might not be thinking about that you think could be -- could have real upside.

Peter Gassner -- Chief Executive Officer

Thanks, Brad. Yeah. In terms of my comments there about the 20% of the opportunity, really referring to when we sell our complete commercial products that we have today, not talking about future products, but products that we have today in the U.S. market, when we sell that to a small biotech.

When they go all in with us, the core CRM is about 20% of the opportunity today. So, the other 80% of that opportunity comes from the breadth of our products. Some of it is from the commercial content. There's a pretty good-sized chunk from data cloud, and that chunk will grow.

The Crossix is a sizable area, that will grow. And then, we have the CRM add-ons, and we also have Nitro. So when we look for this complete commercial, which we have today in certain markets, like in the U.S., it's very early days, but we haven't -- that's where the opportunity comes from. So, we've come a really long way from the days where we just had CRM.

Now, we have a long tail with the data and analytics products being the largest areas.

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

That's great. And then, one more, if I may, please, just on the outside life sciences opportunity. 30 million of revenue is a nice milestone here. Where are you today? I know that you haven't really been investing aggressively, kind of letting the product sell itself, and at some point, perhaps getting more, more aggressively investing in that business to go after the opportunity.

I guess, where are you in that reference selling approach in some of these industries that you're going after with consumers, consumer packaged goods, chemicals, etc.?

Peter Gassner -- Chief Executive Officer

Yeah. Outside of life sciences, we're focused on the consumer packaged goods, chemicals and also cosmetics, although cosmetics has had a tough year here with the pandemic. And in that, we're focused on the quality and the regulatory areas. So, the market is of a certain size.

To put it in reference, it's about similar to our CDMS market size. And it's -- what I would consider it's a relatively slow and steady mover. So, we're deepening our customer engagements with these -- these are areas that don't move too fast. So, to give the guidance on that, we have said before, we would like to have about 100 million business there in that segment of the market by 2025, and we're still on track for that.

So, things are going according to plan there outside of life sciences.

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

Great. Thanks so much, Peter.

Operator

Our next question will come from the line of Tom Roderick of Stifel. Please go ahead.

Tom Roderick -- Stifel Financial Corp. -- Analyst

Great. Hi, everyone. Thanks for taking my question. peter, I wanted to go back to your comment on CDMS.

I think you said six of the top seven CROs are now partnered with you on that front. And perhaps that's feeding the market more at the lower end or the emerging start-up side, which I'd love to hear a little bit more about. But just talk a bit, if you don't mind, about how the CROs are kind of building up your presence in the CDMS side. And what that does mean for the other top 20s, where I know that that would take a little bit more of a share shift over time against some of the entrenched competitors.

Would love to hear more about that.

Peter Gassner -- Chief Executive Officer

Yeah, Tom. I consider that very significant. Six of the top seven CROs supporting Veeva in our partnership program, every one of the top seven CROs except for Quintiles. And that's significant because that means that's what customers are asking for.

CROs are very efficient. They focused on getting the work done. They don't want to lead into technology when customers aren't asking for it. So, this means that customers are asking for this technology, and it means that CROs feel that they can be very efficient with Veeva.

And over time, now that takes a year or two to really work its way into the mid-market ecosystem, but we're very bullish on that. I expect us to be the leader in the clinical data management market by roughly in the 2025-time frame. It's a market that life sciences is cautious on and conservative. But we have a better product, and I'm very pleased with our early adopter success with our customers.

So, I couldn't be happier. We entered that market in 2016, wrote the first line of code, and now we're set for leadership. So, very enthused about that area.

Tom Roderick -- Stifel Financial Corp. -- Analyst

Fantastic. That's great progress. And Brent, not to put too fine a point on it, but I appreciate some of the details on the Engage sort of customer conversion, and the success you're having on that. When you guide for the commercial cloud for this year, can you directionally just give us some sense as to how much of that acceleration on the organic front is being driven by Engage? And sort of the reason behind asking that is as we model out longer term, trying to think about what a more normalized commercial growth rate would be once we sort of lap the benefits of monetizing those Engage customers that have been free for the last year?

Brent Bowman -- Chief Financial Officer

Yeah. And we don't break out specific products in guiding and providing results. But with that, a little texture. As I said in my prepared remarks, what -- we gave you a sense of what we thought the dollar opportunity was, that we had captured at 60%.

The other piece of the equation is we're trying to size that. So, if you think about sizing it, we talked about a percentage of core CRM, so we see that orienting around about 15%. So, if you think about size, that's something to consider there. And the rest of our portfolio had, outside of Engage, would have a record commercial growth quarter, bookings quarter.

So, we did have strength broadly outside of engage.

Tom Roderick -- Stifel Financial Corp. -- Analyst

Great. Really helpful. Thank you. I'll jump back in the queue.

Operator

Our next question comes from Donald Hooker of KeyBanc. Please go ahead.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Good evening. Thank you for the questions here. Was curious if you had any kind of take on the, sort of some of the changes in the CRO space, I guess, obviously, the big news of ICON and PRA Health Sciences potentially merging. You commented you were excited about your progress partnering and working with CROs for a lob out there for you.

Kind of any thoughts on the CRO landscape from your -- from the Veeva perspective, given that merger is out there?

Peter Gassner -- Chief Executive Officer

Yeah, it's certainly a large merger and there's consolidation that can happen in the CRO space. So, I think that's actually going to be good news for us. Both PRA and ICON are our customers, they have some of our products, but not all of our products. I think as they get together and they look for more efficiency, they'll probably look to Veeva for more of our products.

Now, that is a consolidation in the CRO industry, but there's also always specialized smaller CROs starting up in certain areas. So, it's always -- there's both start-ups and consolidation happening. So, I don't see a macro level change in the CRO industry.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Interesting. And then, maybe a follow-up question. Just was curious if you could update us on your Veeva Business Consulting business. I know it's a little bit -- it's small and it doesn't get a lot of focus, but I just have a sense that a lot of these biopharma sponsors out there, particularly in the clinical area, are struggling with wildly changing regulatory environment, the sort of the change in types of therapies coming to market and thinking about how to dovetail that with a lot of the new technologies companies like Veeva are providing.

I would imagine that's a nice growth area for you. Can you maybe talk about that, even though it's small? Are you -- and I think the business consulting is more commercial now, granted, but is there opportunity to expand that into regulatory and clinical?

Peter Gassner -- Chief Executive Officer

Yeah. It is relatively small now, and it is in commercial. We will bring that into the R&D area this year. And let me step back and talk about what the purpose of that.

It's really business process consulting. Can we help customers optimize the business process? A lot of time that's related to our products, but it may not be always related to our products. And that brings a whole bunch of efficiency. Because as you have new technology available, your processes need to change and customers need help with that.

In the clinical side and in the R&D side, particularly, what you're going to have is, how do they optimize processes across the functional groups, the boundaries between quality and regulatory and clinical operations and clinical data and safety, how do they optimize those boundaries, given that new technology is available? Whereas in commercial, what you're doing is optimizing field execution within the regions, how do you operate better in France, how do you operate better in the U.S.? So it takes a really different flavor. When we look at Veeva starting out in the software, now we've really grown to lots of different software, but also data and business consulting. And that's, I think, the complete package. So, it's very significant for Veeva overall.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Thank you. Appreciate it.

Operator

Your next question comes from the line of Saket Kalia of Barclays. Please go ahead.

Saket Kalia -- Barclays -- Analyst

Great. Hey, guys. Thanks for taking my questions here. Maybe first for you, Peter.

Some interesting commentary around the data cloud. It sounds like it's not only another option to customers, but actually potentially even better data, better quality data that is. And so, the question is, can you just talk about what enables the potentially better quality of data and sort of broad brushes, how you envision the pricing on that offering down the road?

Peter Gassner -- Chief Executive Officer

I guess, how is better -- first of all, we set out with the approach to innovate. The existing approach to the life sciences data is really 20 years old, really, and it really hasn't innovated, it hasn't had that competitive push to innovate. So, we are taking a different approach to data sourcing. I won't get into the specifics of that.

But definitely a different approach to data sourcing, and then we're focusing on longitudinal data, longitudinal patient data, longitudinal prescriber data and then our sales data. So if you look at it historically in the past, the industry has gotten used to the data sets they have. But we're bringing them new data sets, with more complete coverage that can be used in better ways. So, it's a very detailed work, but what we find is when data analysts get a hold of this data, they think, wow, this is the way data should be done.

Now, it's new, and so there is resistance to change. So, it's almost like moving from client server to cloud, there's resistance to change, but we're really excited about the innovation.

Saket Kalia -- Barclays -- Analyst

Got it. Got it. And Brent, maybe the follow-up for you. I think you mentioned this when you were talking about the guide, but you touched a little bit on potential -- some potential tweaks to sales compensation.

They did sound like huge dollars, but curious if you could dig into kind of what those tweaks are kind of high level? And just a recap on how that's sort of impacting the expense dollars?

Brent Bowman -- Chief Financial Officer

Yeah. Certainly, Saket, happy to. So, we're not going to get into the nuances of the comp plan changes. But broadly, we're looking to align our goals and incentives as we do periodically to ensure they're aligned to customer success.

And the changes we made enhances that alignment. The change did result in any substantial changes to our sales OTEs, but it did result in a higher amount of P&L expense in the fiscal year based on the accounting treatment. So, all in all, we think it's moved in the right direction to align for customer success.

Saket Kalia -- Barclays -- Analyst

Got it. Very helpful. Thanks guys.

Operator

Your next question will come from Joe Vruwink of Baird. Please go ahead.

Joe Vruwink -- Baird -- Analyst

Hi, everyone. Peter, I wanted to go back to your comments you made at the beginning about MyVeeva, but more broadly, just the rise in patient-centric clinical trials. And I understand it's a development that's still in the early innings. But if clinical practices do change and the virtual or hybrid becomes the new norm, how do you think Vault kind of develops or evolves over the next few years? And is it different, or are there certain opportunities that maybe are greater if we're truly embarking on this kind of -- different way of clinical practices across the industry?

Peter Gassner -- Chief Executive Officer

I don't -- whether the trials are more decentralized or not, won't really affect the core vault or actually the clinical network. I do think, by the way, that is the approach that's going to happen, more decentralized clinical trials. But the really, where we can really help is more patient-centric and more paperless clinical trial. So, when you think about what we're trying to do when the patient -- when the doctor fills out from data after seeing the patient, whether that's virtual or in their office, we want them to be able to type that data into an electronic form, have that flow right back into the sponsor.

That's actually not how it's done today. There's usually paper in the middle. So, what we're doing is with our SiteVault product, providing software to the clinical research institutions for free, so that we can automate that whole process. And we're really excited about it.

I guess it's the biggest undertaking that Veeva has ever accomplished -- or we haven't accomplished yet. The biggest undertaking we've ever started, because we're trying to automate processes across the patient, the clinical research and the life sciences industry. That's quite an undertaking.

Joe Vruwink -- Baird -- Analyst

That's great. And if I can ask one follow-up. Just more in regards to the near-term financial performance and specifically, the change from kind of the initial outlook on fiscal '22, last quarter and today's communication. Other than the update around commercial cloud and what you're seeing specifically for Engage, are there any other factors that drove the uplift in revenue expectations? Because it is a bit larger of a change than you typically have given between the initial and this quarter's update?

Brent Bowman -- Chief Financial Officer

Well, the good news in my answer is it's broad-based. So, we've seen good strength in demand and customer adoption across our development cloud suites. And as I said before, more broadly in commercial cloud outside of Engage. So, it is really a broad swath of strength that we're seeing that drove the increase in our guide.

I guess that's, it's a slight recognition that we're becoming a more strategic partner as time goes on with our customers. And that's that -- we feel that flows through to our business. We've proven ourselves more, we continue to prove ourselves more every quarter. And our product print grows broader, and we're bringing in more senior executives into the company.

So, that -- all those things will lead to broad-based business improvement.

Joe Vruwink -- Baird -- Analyst

Thank you very much.

Operator

Our next question will come from Sterling Auty of JP Morgan. Please go ahead.

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

Thanks. Hi, guys. I'm kind of curious if you could give us maybe a bit of a descriptive update on the mix of the Vault revenue. And what I mean by that, maybe how much of that total bulk revenue is coming from clinical? I know there's a number of products versus just in pure R&D versus commercial, just all the different areas, how would you kind of split it up and describe the breakdown of Vault revenue today?

Brent Bowman -- Chief Financial Officer

Yeah. Sterling, it's Brent. So, we don't break down the Vault revenue into major segments or at the product level. I think we've talked about the market opportunities in regarding the TAM.

So, we've broken that $6 billion down, and we have a long runway across all of those segments. So, across the clinical suite, regulatory, safety and quality. There's a lot of headroom in front of us, and we're really pleased with the traction we're getting.

Peter Gassner -- Chief Executive Officer

And not -- Sterling, not to break it down into specific numbers, but the largest revenue contributors in the Vault families are the commercial content. Now, that was the first place we got into, clinical operations and the quality. Those are the three largest. Our regulatory is good as well, but not quite as large.

It has a longer tail on it. And then, the newer ones are the clinical data management, and especially the safety. Those are those are very, very new. So, that's roughly how to think of it.

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

Great. That's very helpful. And then, one follow-up would be, when you look at the business outside of life sciences, when you think about your longer-term aspirations there, is it all expected to be in that kind of safety and quality area, or how much of the opportunity might come from other additional solutions that you might be contemplating?

Peter Gassner -- Chief Executive Officer

At this time, when we talk about the 100 million, that's really in the quality and regulatory area. And that's what we have visibility into now, and we're executing on. Of course, there's always potential that we would, maybe would do other things. But at this time, we have no plans, we're not executing on anything other than quality and regulatory outside of life sciences.

Safety will be used outside of life sciences, but that's very early and that's not -- none of that is contemplated in the 100 million.

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

Great. Thank you so much.

Operator

Our next question will come from Bhavan Suri of William Blair. Please go ahead.

Dylan Becker -- William Blair -- Analyst

Hey, guys. This is Dylan on for Bhavan. And we'll echo the congrats on a solid quarter. I guess a first question for me, I mean, maybe more toward Peter.

Now, this a couple of quarters in from that initial CRO announcement, we added another kind of top CRO in CDMS. But how should we maybe be thinking of these partnerships as not only drivers of the overall CDMS adoption. I think you just kind of mentioned it on another, earlier question as well. But the overall opportunity for these sponsors and CROs to expand their adoption across the clinical suite.

Maybe as broader, kind of platform integration becomes more and more of a focal point on the clinical side?

Peter Gassner -- Chief Executive Officer

Yeah. I think it's right to focus in on that. The six, seven, the top CROs. What it really indicates is, Veeva is becoming a core part of the fabric in the clinical data management area for life sciences.

This integration with the service partners that the CROs is driven by interest from sponsors, large and small. So, we couldn't be more excited about it, I tell you. And I think we'll innovate also with the CROs, right? When they see our type of technology, it will end up causing them to change their processes to further optimize, and that's something that's going to help the industry overall. You have to remember that the existing products, the existing clinical data management products, the foundation of the two major players, those foundations were made roughly 20 years ago.

And there's still, for example, not even those major players are not true cloud applications and how to upgrade to that automatically, they're not all on the same release. There's a lot of inefficiencies built into the system that we're kind of -- Veeva, I would say is a breath of fresh air for the clinical data management area.

Dylan Becker -- William Blair -- Analyst

Right. No, that's fantastic, and it makes a lot of sense, especially within the rest of kind of the clinical suite being integrated as well there. Maybe one more, if I may, maybe more for Paul. But just kind of maybe given the uptake, and it sounds like you guys are kind of investing in maybe the Physicians World business with virtual webinars, online events, things like that.

Just wanted to get a sense of maybe how you're positioning this business to take -- to capitalize on that opportunity? Because I think maybe it's more of a checkbox initially when you acquired them, it seems like there's a growing and sizable opportunity there around kind of generating insights that was maybe greater than what you had initially expected when you acquired them 12 or 18 months back?

Paul Shawah -- Executive Vice President, Commercial Strategy

Yeah. That's exactly what's happening is, the smaller part of the business when we acquired them. And we've quickly pivoted the business since a lot of the physical events have been pretty much shut down. In some markets, they're still happening.

They're not -- haven't gone to zero, but they've gone down pretty considerably. And what is growing very consistently across most markets are now digital events. And they're growing for good reason, not only because of the pandemic, but also beyond that. Even if you think about the reach that you can get with a digital event where geography no longer is a barrier.

Compliance is a little bit easier. The overall cost and spend on the event is less, because you're not bringing people together physically at, let's say, a hotel or a restaurant. So, there are a lot of reasons that the industry has moved to more digital events, and we pivoted the business to focus on that. And that has -- we're already starting to see some of the impact from doing that.

And I think that will continue over the next couple of years. So when I think about the prospects in the event space, it's actually broadened our portfolio. We can now handle companies that do physical, that do virtual. And what I think we'll see a mix of in the future is this concept of a hybrid event where they do some parts are -- some people are at a physical location and others are joining virtually.

So, it's really strengthened our overall positioning in that space.

Dylan Becker -- William Blair -- Analyst

That's great. Thanks, guys. Appreciate you taking my questions and congrats again.

Operator

Our next question will come from Rishi Jaluria of D.A. Davidson. Please go ahead.

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

Hey, guys. Thanks for taking my question. Nice to see continued strong momentum in the business. Wanted to maybe go back first to the impressive CDMS traction that you're seeing.

I was wondering if you could give us a little bit more color, especially on the CRO traction that you're seeing. Is this -- are these mostly displacing other solutions? Is it greenfield and then going after kind of a bunch of different point solutions that are stitched together? Any color you can give on where you're seeing that traction and what those customers are using in the first place would be helpful? And then I've got a follow-up.

Peter Gassner -- Chief Executive Officer

Sorry, I was on mute, you couldn't hear me. We're always displacing something. Now, it's often not a -- it's not a wholesale displacement. I will start with a study at a time.

And generally, we will be displacing one of the top two large players there. They have most of the market. There are smaller, very regional players or localized players. That's not where we play too much.

So, we'd be replacing the top two. And as to why, it's a better EDC. So, the study builds are faster with a more agile development environment. And that's a huge reason.

And then, the review, the basic of the data review process is a bit more streamlined and its true cloud. So, it's always upgraded. And then, we have a very good CTMS product and eTMF product. And especially, many of those CROs have our eTMF product, and now increasingly, some have our CTMS product.

So, they're looking at getting the whole suite from Veeva. That way, they don't have to maintain these troublesome integrations. They can have a smooth process flow because the CROs are all about efficiency. And they can get more efficient.

It's the same reason why people get a suite of applications from SAP. When things are pre-integrated together, it's more efficient.

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

Got it. That's really helpful. And then, I wanted to get maybe a little bit more color on the subscription net retention rate. I mean, really impressive to see it actually tick up and looks like it's at the highest level since FY '17.

I was wondering if you can give a little bit of color on what drove that improvement from last year and then actually in the prior couple of years? And maybe how we should be thinking about that metric going forward?

Paul Shawah -- Executive Vice President, Commercial Strategy

Yeah. Let me give you just a qualitative view on that. Last year has been pretty remarkable from the standpoint of our customers have been put under significant pressure on the -- both on the development side, but also on the commercial side of the business. They've been forced to change and think differently about how they're operating.

And we've been in a good position where we've established a foundation with most of these companies, and we've helped them operate efficiently, maintain business continuity, operate more digitally, operate more virtually. When doctors' offices were closing down, when clinical research sites were closing down, we were there. So, that -- I think that's showing up in the retention numbers that you're seeing. We are viewed as that as even a more strategic partner.

It's created opportunity for us to shine even beyond the last couple of years. So in these challenging times, companies need a partner that can execute consistently and I think that's part of what you're seeing in that higher retention rate. I think the one last thing I'll add is, the broader vision that we talk about in each area, commercial cloud and development cloud, about bringing all of these process areas together. Companies are buying broadly into a development cloud vision.

And then, what -- the decisions they make after that become really easy. It's really a matter of how do they get to that? How do they grow into that development cloud over time? So it becomes more of a road mapping exercise than a vendor selection exercise.

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

Great. That's very helpful. Thank you so much.

Operator

Your next question comes from Brent Bracelin of Piper Sandler. Please go ahead.

Brent Bracelin -- Piper Sandler -- Analyst

Thank you. Maybe we'll start with Brent and finish with Peter here. Brent, vault subscription in our model is now actually larger than commercial for the first time. And not only is this now the largest product, but also saw accelerating growth.

So, as you just think about the demand drivers that drove this acceleration involved this quarter, you talked about broad-based, but was there any other factors that drove strength in Vault? And again, one quick follow-up for Peter.

Brent Bowman -- Chief Financial Officer

Yeah, and we saw, as people adopt products like eTMF and they look more broadly across the clinical suite, you're seeing that just further adoption, so buying into the integrated vault platform. So, a lot of strength, and it is truly broad-based. We saw strength in CTMS. We saw strength in our quality suite and QMS as well.

And so, it's really an exciting time with broad adoption across our product set. So, customers are starting to go more all in, in the vault space.

Brent Bracelin -- Piper Sandler -- Analyst

Got it. So, it sounds like there's a little faster uptake of some of the add-ons there. I know there's, I think, 17, 18 Vault products. So, good to hear.

I guess, Peter, for you, I wanted to follow-up on the commentary you made around biotechs. You talked about seeing some biotechs have increasing interest in kind of going all-in on Veeva. My question is, what's the biggest benefit to the biotech? I mean, why are they coming to you, saying we want to go digital first? Is it just faster time-to-market? Is that the primary benefit that the biotechs want? Is it just a more efficient digital internal process? Help me understand why you're seeing that at the biotech level? And could this be a precursor to other firms wanting to go kind of all in and have a digital-first focus as well.

Peter Gassner -- Chief Executive Officer

So the concept of the biotech, so as a biotech they will be developing their drugs for many years using many, many millions of dollars to go through the clinical trials. And then, they have to commercialize, and that's a very, very critical time. It's a make or break time for the company. So, that's the context when they -- some of them coming to us in the commercial cloud and wanting to go broadly in with Veeva.

Now, why do they want that? A, they need somebody they can trust. They know digital is really important, and they need a partner they can really trust. They've learned to trust Veeva. Many of them have been using us on the R&D side.

And they have to do it right digitally. And so, they -- this is kind of new, right? It's not the same way to do it. So, they're looking for a company that can put it all together for them. And I think our business consulting is critical in this.

In fact, when they go all in with us, business consulting is basically a required part of that package, because you can't do that just with technology. You need the business process work to make the technology -- to make that technology work for you. So, it's critical for the biotech, and they trust us, and we have the complete package. That's why they would come to us.

Otherwise, they have to be the general contractor. They might buy data from here and software from here and digital from there and content from here and get consulting from another place. That's more areas that could fall down if the company themselves has to be the general contractor. So, hey, how do you do that for us?

Brent Bracelin -- Piper Sandler -- Analyst

Certainly, helpful and explains why we're seeing certainly a big uptick in a number of job openings on the consulting side. Thank you so much.

Operator

Your next question will come from Kirk Materne of Evercore ISI. Please go ahead.

Kirk Materne -- Evercore ISI--Analyst

Thanks very much. peter, you're actually spending a lot of time with your customers talking through their own digital journey from a sales perspective. I was kind of curious about how you're thinking about your own go-to-market operations, not only in the coming year, but how are you thinking about making some changes? And then hopefully, when people can start getting on planes over the next few months or six months, are there any products that you think will be helped out by the fact that you can have people on site, talking to your customers in person again, or have you gotten to the point where you all can sell pretty much the whole portfolio virtually at a pretty effective level? I'm thinking about things like data, where these are big transformations that may be having those conversations in person might be helpful. So, can you just walk through kind of anything you're changing this year and then anything that might be helped out maybe, by moving past COVID?

Peter Gassner -- Chief Executive Officer

Now, that -- what we're changing this year is our summits. We have our customer summit. Those are always a key part of Veeva. We put the customers together.

We would always do those in person, two-day event. Last year, we had to pivot very quickly to do those online, and they went well, but I think we can do better. So, this year, we're looking at doing our virtual events even better. We're going to try out some new formats that we're really excited about.

So, that's one thing. And have the marketing and the customer engagement a little more continual. You've got to remember last year, we had to pivot so hard on our product model, our product road map. And to support our customers and all their twists and turns.

So, we were sort of hair on fire. This year, we're in a steady state, I think, with COVID, and so we're going to optimize some of our marketing and sales processes. Now, in terms of getting back together, I don't think that will impact any one product more than any other product, but I do think that in-person interaction generally does help the speed of business. Yeah, I think overall, business will be a little more ineffective over time if we don't get back together.

Now, that won't just affect Veeva, I just think overall, that personal connection is needed. It provides people with energy and ideas, and travel has a way of shaking you out of your norm. So, I'm really looking forward to it, how about that? We need to travel. When we can, we're going to get out there.

Because you get used to this being, not having that interaction and something is missed. So, the whole Veeva team is, and our customers. We're looking to get back together again.

Kirk Materne -- Evercore ISI--Analyst

That sounds great. Congrats on a nice year. Thank you.

Operator

And we have time for one final question from Stan Zlotsky of Morgan Stanley. Please go ahead.

Stan Zlotsky -- Morgan Stanley -- Analyst

Perfect. Thank you so much, guys, and congratulations on a very strong quarter. I actually wanted to come back to net revenue retention for a second, because I mean, that was -- that was certainly an impressive result. Maybe help us unpack it a little bit.

And how much of the uptick that we saw in net revenue retention, to 124% in fiscal '21, was due to the "like inorganic" or maybe onetime contribution from selling the Crossix product into the installed base, or maybe in the Engage product, obviously, that's completely organic domain by you. But it was obviously a disproportionate benefit this year as well. How much of that was a driver of the uptick versus what's really sustainable going forward into fiscal '22 and beyond?

Brent Bowman -- Chief Financial Officer

Stan, it's Brent. So, currently, Engage what did contribute to that. But what I would say is development cloud more broadly also, was a big driver of that uptick as we continue to land and expand our offerings across our customer base. So, it was more than just a onetime pop.

There was some substantial of attach and cross selling that happened in the development cloud space that helped drive that number.

Stan Zlotsky -- Morgan Stanley -- Analyst

Got it. That's helpful. And just maybe taking slightly reverse way to ask the question about the pharmaceutical headcount reductions. And as much as in Q3, you guys were talking to us about potential for a 10%-ish type of decline in global headcount in 2021.

What happens if that decline is not 10%, right? I mean, what's baked into your billings guidance for fiscal '22? What happens to -- what kind of renewal base do you have baked in there? And are you truly baking in 10%, or is this something less than the 10% of the reductions you were talking about in Q3?

Paul Shawah -- Executive Vice President, Commercial Strategy

Yeah. So, we, in fact, are baking those reductions in, and we bake them in over time because we don't see this as an abrupt change. We see it as a gradual change that will happen and over time, it will happen, we believe, over the next one to two years. Now, the impact on our financials will be somewhat muted because that will happen over a period of time.

Maybe even a change that happens this fiscal year may not hit us until the next fiscal year. And I think a lot of that will be offset by strength that we're going to continue to have or anticipating having in CRM and in the add-ons in the broader commercial cloud portfolio. So, we have, in fact, baked those reductions in. But again, most of what you see there is offset by some of the core commercial cloud strength.

Stan Zlotsky -- Morgan Stanley -- Analyst

Got it. Thank you. Thank you, guys.

Operator

And we have no further questions. I'll turn the call back over to the presenters for any closing remarks.

Ato Garrett -- Senior Director of Investor Relations

All right. Thank you, everyone, for your time, and we are looking forward to talking with many of you at the Morgan Stanley conference tomorrow, and we're also looking forward to a great year ahead. Thank you.

Operator

And this concludes today's conference call. Thank you very much for joining. You may now disconnect.

Duration: 66 minutes

Call participants:

Ato Garrett -- Senior Director of Investor Relations

Peter Gassner -- Chief Executive Officer

Brent Bowman -- Chief Financial Officer

Ken Wong -- Guggenheim Securities -- Analyst

Paul Shawah -- Executive Vice President, Commercial Strategy

Brian Peterson -- Raymond James -- Analyst

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

Tom Roderick -- Stifel Financial Corp. -- Analyst

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Saket Kalia -- Barclays -- Analyst

Joe Vruwink -- Baird -- Analyst

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

Dylan Becker -- William Blair -- Analyst

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

Brent Bracelin -- Piper Sandler -- Analyst

Kirk Materne -- Evercore ISI--Analyst

Stan Zlotsky -- Morgan Stanley -- Analyst

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