Veeva Systems Inc

NYSE:VEEV

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Veeva Systems Fiscal 2026 First Quarter Results Conference Call. [Operator Instructions]

Thank you. And I would now like to turn the conference over to Gunnar Hansen, Senior Director, Investor Relations. You may begin.

[Gunnar Hansen, executive]

Good afternoon, and welcome to Veeva's Fiscal 2026 First Quarter Earnings Conference Call for the quarter ended April 30, 2025. As a reminder, we posted prepared remarks on Veeva's Investor Relations website just after 1 p.m. Pacific today. We hope you've had a chance to read them before the call. Today's call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer; Paul Shawah, EVP, Strategy; and Brian Van Wagener, our Chief Financial Officer.

During this call, we may make forward-looking statements regarding the trends, our strategies and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. 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-K.

Forward-looking statements made during the call are being made as of today, may 28, 2025 based on the facts available to us today. If this call is replayed/reviewed 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 may discuss our guidance on today's call, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

On the call, we may 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.

With that, thank you for joining us. Now I'll turn the call over to Peter

[Peter Gassner, executive]

Thank you, Gunnar, and welcome, everyone, to the call. It was a strong start to the year with results above our guidance. Total revenue in the quarter was $759 million and non-GAAP operating margin of 46%. Thanks to the team and our customers, we have now achieved our calendar 2025 revenue run rate goal of $3 billion. Although the macro environment is more uncertain today compared to 90 days ago, we have not seen a material change to our financial results or pipeline at this time.

Setting our sights on our 2030 goals last year has really aligned at [ Energized Veeva ]. I consider this our best first quarter ever in how we're executing across the company. Veeva AI is a major initiative and off to a good start. I'm especially excited about the positive impact Veeva AI can have on the life sciences industry. We'll now open up the call to your questions.

[Operator]

[Operator Instructions] And our first question comes from the line of Joe Vruwink with Baird.

[Joseph Vruwink, analyst]

I wanted to start with your perspective on the 200 customers moving to Vault or considering Vault CRM for next year. I'd imagine many of these are migrations. Have the reasons customers cited behind migration decisions changed at all? And the reason I ask is it seems like Veeva at this point has really delivered on a product road map once shared customers can now see things like service center and campaign manager and you also now have, I would say, more fidelity behind the AI strategy. Are these starting to factor into why now, why the decisions? And maybe on the flip side, when customers aren't moving with you, what's coming up in those decisions?

[Paul Shawah, executive]

Joe, this is Paul. Thanks for getting us kicked off here. So just to be clear on that, remember, 1 year ago, we were at a handful of customers live. Today, we're at about over 80 customers live. And I think the number you're referencing is about 1 year from now, where we're on track to be about 200 customers live on Vault CRM. So Vault CRM is going really well. It's working. Now the why, why is that? It's better than Veeva CRM. Customers like Veeva CRM, but it's better.

And what makes up that 200 number are really 2 things. It's new customers, and its migrations. So in the quarter, as an example, we added 20 [indiscernible] Vault CRM customers to that number and where we added Vault CRM -- [ 28 ] Vault CRM customers total and about half of those were migrations and the other half were net new customers to Veeva. So that's how to think about what will make up that 200 new customers and migrations.

And the reasons are everything that we've talked about, it's better, our AI strategy. We'll have agents in the product by the end of the year. It's bringing sales, marketing and medical together. We're innovating in a lot of different ways. So new companies want to get started there and other customers want to migrate. In terms of why customers may not make a decision for Veeva and we've seen some of this, some companies want more of a custom-type project. So I don't expect that to be the path. We expect to win and retain the vast majority.

[Joseph Vruwink, analyst]

Okay. That's great. I guess on the go-forward forecast, it's an interesting contrast when you get a more dynamic macro but outright strength for Veeva when you may be honing in on some of the more discretionary aspects of your revenue model and I'm thinking about like services or maybe the [indiscernible] audience building, would you expect to see those weaken at this point if there were maybe looming signs of pressure for the second half? And is the fact that maybe that pressure isn't being seen factoring into how you think about the rest of the year?

[Peter Gassner, executive]

That's a pretty nuanced question. It's Peter, I'll take that one. So as we mentioned in the prepared remarks, the macro environment is uncertain, and there's some uncertainty largely caused by the dynamics in the U.S. administration. Now we haven't seen that in our results, and we haven't seen that in our pipeline, not to say that we would or we wouldn't going forward, but we haven't seen it so far. .

Generally, what we could see is funding issues could come if there's uncertainty that could come in the small market, the smaller side of the biopharma so that could delay projects and things like that and could cause some conservatism in large pharma. But certain things like Crossix that may not be affected by that because Crossix has a sort of a shorter business cycle, and it's really humming along into a way to get quick ROI. So I actually don't think it would expect effect Crossix that much. But [indiscernible] wait and see how things play out.

[Operator]

And our next question comes from the line of Ken Wong with Oppenheimer.

[Hoi-Fung Wong, analyst]

Fantastic. Peter, I wanted to perhaps address the comment you called out in the prepared remarks in terms of the horizontal market. It seems like you guys have made at least some progress there, and you're moving forward on horizontal CRM. Could you provide us just a little more color in terms of how you're thinking about the approach there, the potential differentiation? And to the extent there's any kind of time line, that would be much appreciated.

[Peter Gassner, executive]

Yes. We're pretty excited about that new market. So horizontal business applications, which we announced last year and now what we said in the prepared remarks that we are focusing in for our first area in the horizontal CRM. Now that -- when we look at that, there's many areas that the exact product area. That's something you have to determine inside CRM, the exact customer segments. That's something we have to determine as well.

So we'll go through those motions and figure that out. And I'm excited about getting customers. So I hope to have first customers by the end of the year, hope to have that. And then you start making the customer successful. And that's really how we've grown our business. It's outside of life sciences, this new market, it's a different team. It's not going to be confused with life sciences. It's a different operating model. But the one thing that is common is we can live our values of customer success and employee success and speed and focus just on customer success and product excellence. I'm pretty excited about it, actually, what we're going to do out there. It's a whole new Veeva out there. .

[Hoi-Fung Wong, analyst]

Appreciate the color. We're looking forward to it as well. And then Paul, I wanted to maybe dive into the commercial strength, meaningful acceleration there. I guess, fairly surprising considering most of us knew that as maybe a more mature business. Where are you seeing this outsized growth? You called out Crossix, are there other areas of the business, whether it's cross-selling something or new products that's really driving that upside?

[Paul Shawah, executive]

Yes. So you're right. I mean we're executing well across the entire commercial area, but I would specifically call out Crossix. We invested heavily in the product over the last couple of years, and that's paying off in -- both in the marketing and optimization space, also in audiences. I remember that can be a little lumpy. So there can be ups and downs quarter-by-quarter.

But over the long term, that will be a really nice growth business for us. And so Crossix did well. And then we're executing well in all the other areas. CRM is relatively stable, which is a nice momentum as we look across data cloud, including [ Link, Compass ] early days in those areas, but we're executing well.

[Operator]

And our next question comes from the line of Brent Bracelin with Piper Sandler.

[Brent Bracelin, analyst]

Maybe for Brian, sticking with commercial strength here. This is the highest growth rate we've seen in kind of 3 years. And as we double click, you flag Crossix, any other drivers you would flag? I know data cloud is early, but is there a contribution there? Any color just given the magnitude of acceleration and highest growth in 3 years. Any other color would be appreciated.

[Brian Van Wagener, executive]

Brent, really happy with the execution across the business in Q1 and the revenue growth rate that we saw really reflects, I think, broad-based execution. We saw a strong growth out of our R&D business as well, with guidance for the year now at 19%. So that remains a really strong growth engine for the business. And then the outperformance in the quarter, as we called out in some of the prepared remarks and you mentioned was really driven by Crossix, which outperformed our expectations. .

And within Crossix, predominantly driven by the usage-based area of that business. So that can be a little bit lumpy from quarter to quarter, and that's reflected in our guide for the full year. But we're seeing really strong growth out of that business over the long term. It's a business that's growing at more than 30% year-over-year. And so we think it can continue to contribute meaningfully to our growth over the long term.

[Brent Bracelin, analyst]

Got it. Over 30% growth. Super helpful color there. And then, Peter, just a follow-up on horizontal CRM again, it's your first area. Sounds like you're very excited. Why the excitement? And I asked why? Because you have sales force that's kind of a dominant player in the large enterprise space and then you have HubSpot that's kind of emerged on the scene here in SMB. So what's unique about horizontal CRM that gets you excited about what Veeva is thinking about here?

[Peter Gassner, executive]

It's just unique in that there are so many things we can do. Now I would say Veeva is more expert at large markets as well, large enterprises than we would be in the QuickBooks type or HubSpot area. So I think you'll see us target there, but there's many, many entry points we can go after, and we just think it's in need of innovation when we look at the technology that we can bring to it in our business model, our public benefit corporation orientation, we'll be a very differentiated offering.

So we're excited about it. And it's this excitement of getting close to getting our first customers in our first product and knowing that we have a great team on it. And also, I think, something what you're hearing is the excitement of some of the fundamental technology breakthroughs, which we're not going to go into on this call. But I think people got used to that there's nothing new that you could do. But actually, there is something that you can do. So we're pretty excited about it. .

[Brent Bracelin, analyst]

Call me intrigued. it WILL be interesting to watch. Thank you so much.

[Operator]

And our next question comes from the line of Saket Kalia with Barclays.

[Saket Kalia, analyst]

Okay. Great. Nice start to the year. Peter, maybe for you. Just to dig into the Crossix business because it's been mentioned a few times, and it seems like it was one of the main drivers to some of the billing strength outside of FX. Can we just dig into that? I mean it seems like you're gaining market share. There have been questions just around macro uncertainty and whether customers would be willing to invest as much in tools like that. But this seems to be bucking the trend -- can you go a little deeper into what you think is really driving that strength in Crossix?

[Peter Gassner, executive]

Yes. I -- at the highest level, I would say, is we're growing the product. When we started with clinical back in the day, we had one application and then we had 2 in the clinical operations, seeing eTMF and CTMS. Now we have about 5 major applications in there. The same thing with Crossix. So our crossix started historically with digital, consumer measurement and optimization.

Now we're starting to get very strong in HCP, health care provider, measurement optimization and then audiences across both segments. So our offering is getting more broad and getting more valuable. So when we sell a pretty comprehensive Crossix deal. That value is maybe double in the size of what it was 3 years ago because the value we can provide. Then we also are seeing companies really. And it's a trend that continues to lean into leveraging their digital spend. So in the United States, if a company could stand let's say, $500 million in advertising, if they could double the value of that, that's very fast ROI. And that's not a 12-month implementation.

I think it's a very quick implementation. So you're seeing that? Also, you're seeing us take a more strategic approach, meaning the integration with our CRM products and optimizing more for long-term agreements rather than the shorter-term agreements and just getting higher in the account. So it's a combination of factors. I'll honestly say we had a great team on crossix too. Great leadership, all the way down to the analyst level and the leadership and they're just executing they're humming along. So they're kind of winning the race.

[Saket Kalia, analyst]

Got it. That was a super helpful answer. Brian, maybe for my follow-up for you. It's great to see the higher billings guide for the year. I don't think a lot of you folks were expecting that even excluding the FX tailwind. Can you just maybe dig into some of the drivers there? Maybe we hit on some of it here with Crossix, but also some of the other drivers there, maybe like billings duration or any other things that you want to flag as we thought about the slightly higher guide for billings for the year?

[Brian Van Wagener, executive]

Saketh, had 2 major factors, as you mentioned. One is the FX guidance that's flowing through to billings. But then the other is largely the revenue outperformance that we saw in Q1 from the subscription side coming through to billings. There's always a little bit of timing and duration things at the margin, and there's some of that in there, but the main 2 factors are FX and then the revenue beat.

[Operator]

And our next question comes from the line of Rishi Jaluria with RBC.

[Rishi Jaluria, analyst]

Maybe 2 strategically focused ones. Number one, look, I wanted to think about the CRM business. You've talked about getting into marketing and service. You came out some initial applications there. Maybe can you talk about what you're seeing from early customer feedback and adoption of these? And at what point, whether it's in the next year, 3 years, 5 years, can we see those actually become share gainers in the space? And then I've got a quick follow-up.

[Paul Shawah, executive]

Rishi, so we're early in both of those areas. But to your point since we made the move to Vault CRM, we've been able to innovate in totally different new ways, and that includes bringing sales and marketing and service all together in a single customer database that hasn't been done in life sciences. That's resonating.

That's really good for customers. It will help customers become more customer-centric. So this is a significant value proposition, but we're very early days. Exciting news is we have some early customers in both of those areas. We're just getting started. Remember, the requirement is that they're on Vault CRM. So for someone to get started with, let's say, campaign manager or service center, the first step is moving out -- migrating to all CRM or getting started on Vault CRM. So it's a smaller pool to play in, at least today, and we're going to focus which means we'll largely focus on some smaller and midsized customers. But then over time, I expect that we'll make even more progress in the midsize and even in the large company. So it's is a long journey, but we're innovating in a really different way. It's something to be excited about. .

[Rishi Jaluria, analyst]

All right. Wonderful. That's really helpful. And then, Peter, on the AI front, look, I appreciate that you're taking a more gradual and slow approach to AI versus kind of overpromising on your delivering, which I think is always appear with any new technological wave. Maybe can you walk us through, number one, how you're kind of thinking on AI in life sciences and the willingness to adopt it has evolved? And number two, if we think about kind of what this can really unlock the customers over time, where do you kind of see it shaking out other than the typical efficiency gains because I'm sure that there's a major unlock that you can see over time using AI?

[Peter Gassner, executive]

Yes, I do. I'm very bullish about what Veeva can bring with AI for the life sciences industry. I think if you look over the next 3, 4, 5 years out to 2030, I think this can help increase life sciences efficiency by 15% or so through the AI. That's a huge number when you look at that. So I really think it will be a step change. Why I'm so bullish on it because Veeva has the core applications, and we're building the AI very deeply embedded in the core applications. So when we build AI, we're not building a generic AI.

We're building a medical legal regulatory approval agent. -- a CRA agent to those pre-call planning, a safety AI agent that can transcribe pretax into a safety case, so deep AI applications -- and you need the deep core applications and the AI working together. And that's where the magic will happen. It's just very, very, very clear to me. That's that's what I'm excited about.

I think we -- the core technology settled down a little bit in terms of large language models, what's going on there. And then it's very clear that this AI is a new computing paradigm. It's it's something that can automate certain things that humans can do, which basic software, traditional software can do that. It doesn't work like a hemo. This is nondeterministic computing they can automate some things that a human can do, but it doesn't obviate the need for a core application. So we let the core get settled down of the large language models, OT to settled down. We developed our partner program. We developed our direct data API. Now we got a specific and separate team working on BVA I couldn't be more pleased with our positioning where we're at right now with AI. .

[Operator]

And our next question comes from the line of Brian Peterson with Raymond James.

[Brian Peterson, analyst]

Contonga, I know you talked with a lot of customers and how they're thinking about their go-to-market motion. I'm curious -- on the relative prioritization of IT spend, if we think about it in the lens of sales versus marketing versus customer service, are any of those areas seen increased or decreased prioritization in kind of a GenAiworld? Any thoughts on that?

[Paul Shawah, executive]

Yes. Brian, thanks for the question. Yes. So where is AI likely to be and across sales, marketing or service Yes, 2 questions. Overall, the way to think about the pharma industry is the Puma relationships, the sales organizations to spend on the sales force is very significant and very meaningful -- and if you can provide productivity gains and effectiveness gains for the field team, you have a very significant impact. So I think there's a -- we're seeing a lot of focus in the sales side, which is why 1 of our first agents will be in the CR in the core CRM space, the CRM bot. We think we can make customers significantly more productive from a fuel team perspective. So it's not to say that we're not seeing investment in other areas, certainly, customer service. case intake is an example. There's a lot of examples on the marketing side. But I would prioritize sales higher given the size, the importance of the relationships and the potential impact for to have. .

[Brian Peterson, analyst]

Got it. I appreciate the color. And Brian, I know in the prepared remarks, Peter mentioned [indiscernible] from some of the customers. I'm curious as you think about the outlook for the remainder of the year, was there any incremental caution that you factored into the guidance

[Brian Van Wagener, executive]

Thanks, Brian. So without a doubt, I'd say there's more uncertainty today than 90 days ago. And so if that persists, it's not going to have a positive impact on the life sciences industry or on patients. With that said, so much of our business is subscription-based. It's in mission-critical areas and the industry that we serve is more long-term oriented.

So in the short term, we're a bit more insulated from some of those pressures. And as we said in the prepared remarks, we're not really seeing any material impact to our financials or pipeline yet. We've got deals progressing as expected, contracts are renewing, projects are proceeding on or ahead of schedule. So given all that, our guidance right now assumes that things continue roughly as they are now. That means that there's more uncertainty in the world and the unease comes with that, but that customers continue to navigate it effectively. .

[Operator]

And our next question comes from Stan Berenshteyn with Wells Fargo Securities.

[Stanislav Berenshteyn, analyst]

First, maybe going back to POS. We heard recently maybe there's been some pull forward in commercial activity by biopharma into the first half of the year. I'm just curious if you're seeing any signs of this within Crosstex, maybey you can square that with how Bostik has performed year-to-date versus the same time last year? .

[Peter Gassner, executive]

Yes, I'll pick that one. This is Peter. I wouldn't say any particular pull forward we're seeing. I think we're seeing -- in the case of Crossix, customers just wanting to build up their digital marketing capabilities and part of that is being more effective on how -- where they're putting their campaigns and their audiences. So I wouldn't say any particular pull forward. .

[Stanislav Berenshteyn, analyst]

Okay. And then I have a follow-up on the Campus product. I think it's been a little bit more than a year since you launched prescriber national Compass products. I was just hoping to get an update on the adoption and momentum trends under the segment? .

[Peter Gassner, executive]

Yes, compass is doing well. We added about 10 brands this quarter, mostly in the patient area and that continues to grow. And [indiscernible] Compass, a marathon. The industry is used to doing things in a certain way with data, and it's a hard business to get into. But we're making good progress there. In terms of prescriber and national, I would say we're still definitely in the early adopter area. So we've got a few early adopters, pipelines getting a bit bigger. We're focused on adding to our data network and also focusing on customer success. So in prescriber and national, it's just not a mature business yet. It's not a business to scale yet. -- but we're encouraged by what we see from early adopters. .

[Operator]

And our next question comes from the line of Tyler Radke with Citi.

[Tyler Radke, analyst]

Peter, I wanted to start with you on the macro environment. You talked about some of the tariff uncertainty not being great for business, which I think we can all appreciate. But One of the things that we have heard is some signs of potential reshoring in terms of the manufacturing within the pharma industry. To what extent -- do you -- how do you view this opportunity? Is this a potential tailwind? I know it's potentially a ways away, but I would just love to hear the conversations you're having with customers and how Veeva could potentially benefit from that. .

[Peter Gassner, executive]

Specifically about the tariffs and the potential reshoring. I wouldn't say that's a headwind or a tailwind for Veeva actually. There, we're really looking at enterprise type of capabilities in our large customers. And then for small customers for small biotechs, they wouldn't generally have multiple manufacturing sites and maybe use contract manufacturers.

So I think it's not a headwind. There could be a tailwind if they have to do things -- sorry, there could be a headwind if they have to do things that take higher priorities. Let's say they have some long-term capabilities projects in the quality area that they want to get started on. But there's some emergency reshoring that they have to do that could take strategic focus and delay projects. Now having said that, we've seen no evidence of that so far .

[Tyler Radke, analyst]

Okay. Great. And a follow-up on the -- I guess, on the updated guidance for the full year. And the earlier question was sort of asked. But I guess, are you -- if we think about the change versus 90 days ago on the revenue and billings guide, are you increasing discount rates or any tye of deterioration in close rate assumptions? Or are you assuming a consistent macro environment versus 90 days ago? And I think what investors are trying to understand is this was a very solid quarter. But would the raise be even greater, had you not seen kind of the macro and tariff uncertainty play out in the quarter. .

[Brian Van Wagener, executive]

I think we really have not seen any impact from the macro on the velocity of business on close rates or those kinds of things. And so what you're seeing in Q1 is, again, that outperforms largely of the Crossix segment and then the timing of services revenue. So that timing we expect to kind of normalize back out as we go through Q2 to Q4 on services. .

And so the beat on the Q1 Crossix side really pulls through to the balance of the year, and you see that reflected in the billings guide going up as well. SP27712093 So outside of those factors, I would say the the business is largely as we expected it to be 90 days ago. We're seeing really good execution in all the areas of the business and feeling really good about the trajectory going forward for the year. .

[Operator]

And our next question comes from the line of Craig Hettenbach with Morgan Stanley.

[Craig Hettenbach, analyst]

Great. Thank you. Just following up on the macro. What do you think would prove to be most insulated? Like if things do get more difficult into the back half, are there parts of the business you'd expect to be kind of most insulated versus some areas that you would expect to maybe see some impact if things were to deteriorate.

[Peter Gassner, executive]

Well, I'll take that one. Hard to estimate too much because there's multiple ways that things could deteriorate. It could be interest rates, it could be be drug pricing. It could be specific to 1 country or another, it could be geopolitical conflict. So hard to really speculate there. the most durable part of the business is our long-term subscription contracts because they just don't really get affected by things. Then business consulting engagements, services engagement, those are quicker to get impacted. And if things get very tough, which we saw a number of years ago, it can impact our really small emerging biotechs because they can't get funding until projects would stop. And then sometimes, they may go out of business if the funding environment is dying. So the bulk of our business is in these long-term subscription projects and that those just aren't susceptible to those short-term swings.

[Craig Hettenbach, analyst]

That's helpful. And just as a follow-up, Peter, understanding its Veeva AI just recently kind of rolled out. Any initial feedback from customers and how you think in the coming years, how it might impact your overall business?

[Peter Gassner, executive]

Yes. that impact -- the reception from customers is very positive because it just makes sense. It's not a lot of hype. They need the AI working with the core applications. They know Viva cares about the industry. We'll be responsible with the data, and they can see the tangible use cases. So there's a lot of excitement. How it can move our business forward. I think the AI is something that we will charge an appropriate license fee for. So I think it will be a net positive for Veeva. We don't have that packaging worked out yet. We do want to price it so that it can be very reasonable and broadly adopted helped the industry move forward. And yes, it certainly help our revenue all the time, but we don't have any specific projections at this time. .

[Operator]

And our next question comes from the line of Kirk Materne with Evercore ISI.

[S. Kirk Materne, analyst]

This is Bill on for Kirk. Peter, can you highlight some of the key takeaways from you from the Commercial Summit last week? .

[Peter Gassner, executive]

Sure. Commercial Summit. I would say First thing I would take away it sounds very basic, but the customers feeling is good, and I probably had more than 50 one-on-one conversations that were each of 5 to 10 minutes or more. So that's a pretty representative sample size and nonscripted. So customers feeling is good. That means we're executing well. We're hiring good people that have the right customer relationships that are confident that are bringing value in our sales, services, business consulting, product management. So -- that's number one. And I think that is not to be underrated betakthat is the gift that will bring value over the next 5 to 10 years. The next 1 is a whole different side around Veeva's CRM -- Vault CRM. 80 customers live this time versus just a handful last year. Products mature, A couple of big top 20 customers. Midway and fly. We had one of them boom into the -- couldn't actually be there the persona things where they couldn't be there at the summit. So they zoomed in, this is the person, the SVP of Digital from a top 20 pharma that's confirmed, yes, we'll be live here in a month or so and fully live in all of our multiple close to 20,000 people around the world by the end of the year. So that was a whole different side there and then beta AI, making it real. When I showed the demo of Veeva AI, one example of what Veeva can do with CRM BOT, you just see the aha moment go with the customers because what they want is they want AI to help them with the engagement planning, right, do all that work.

And then all the data entry afterwards, do that work so they can focus on the engagement in their field. And you just see the light bulbs going on. And that's what I'm excited about bed. I want to be known as the company that probably really did AI right. maybe in a durable way. It's adding a ton of value where Veeva is bringing in $1 and customers are getting $4 a value and wow, that was done right. So there was that hearing for the first time of -- it's somewhat relief because we've been measuring carefully on AI and not jumping in in the hyping -- so then you could see that relief from the customers. Yes, this is the Veeva period goes, right? They have a plan now they're starting to execute and making plans around it. So that was the excitement.

And the last thing I'll mention is that our database, data cloud is becoming really real, and people are starting to understand, hey, we have commercial cloud and data cloud, and they work together, they're modular, but you can connect them. and that's what our commercial solutions are. So Veeva, not just the CRM company anymore. When I remember some years ago on an earnings call multiple years ago, I said, "Hey, CRM over time will be not the major part of our commercial solutions. A man could you see that at Summit. The serum add-on products, marketing, service center, data cloud, Crossix, business consulting, CRM is the start of our commercial core CRM. So that was -- you asked a small question. I guess you got more of an answer than you were looking for, but that -- you can tell me the excitement about commercial summit, about 2,000 people there and so many ideas that stays. It was wonderful. I think we should keep doing it. Paul, do you think we should keep doing our summits?

[Paul Shawah, executive]

Count me in.

[Peter Gassner, executive]

Count you in. Okay. We're going to keep going on.

[Operator]

And our next question comes from the line of Jailendra Singh with Truist Securities.

[Jailendra Singh, analyst]

Congrats on a strong quarter. I wanted to ask about the CRM conversion to Viva. I understand these top 20 pharma companies still have some time before they can decide and you have top 20 going live in 2026. But compared to your internal expectations, I mean, expectations you had like maybe 18, 24 months back, -- are you surprised by the pace at which these top 20 are coming through? What are the most common decision-making drivers you come across in terms of these top 20 pharma companies.

[Paul Shawah, executive]

Yes. So first, I would say, overall, we're making great progress in top 20, and we're on track with our expectations. As I think back a year or 2 years ago on track, maybe even a little bit ahead of what our expectations were. Now you think about what does that timing look like and what makes up that decision-making process. Customers are happy with a CRM -- we're not pushing anybody to move. So there's not really that urgency. Now eventually, there will be. We've talked about the red zone which starts to kick in, in that 2027 time frame, particularly if you're a large customer, a top 20 company, you want to make a decision before that 2027 time frame, which is why we've said most large companies will make decisions either in 2025 or in 2026. So they'll have plenty of time to migrate and move. So customers are happy. They're going to make that decision when they're ready. We're not doing anything on natural to force them into a specific time line. Now the ones that have made decisions already and there's 4 that have publicly announced -- or 4 top 20, I should say, that have publicly announced their decision, they want to move fast. They want to get to all of the innovation that you heard us talking about, and they want to get this behind them and be able to take advantage of things like our sales and marketing and medical and bringing all those pieces together and all the innovation, all the excitement. So we're doing this in a customer-friendly way. We're excited with the progress. I think we're very much on track. .

[Jailendra Singh, analyst]

Okay. And then my quick follow-up on the topic of takeaways from the Veeva Commercial Summit very helpful. But as you compare to the conversations you were having like last year Summit, did you guys come across like pharma executives having increased focus on ROI, budget priorities? Or is it more or less same as compared to last year?

[Peter Gassner, executive]

In terms of the dealing from the customers, -- similar to last year, I think they have -- last year, there was still some uncertainty how the administration was going to hold. There was a U.S. presidential election, things like that that uncertainty in a way is gone because they have a new environment that they're working in, but similar in that they're focused on execution. And I think leaning into the digital a bit more. And that's 1 thing I noticed leading into the digital marketing a bit more and the data and analytics. So getting more systematic, a bit more systematic in commercial. .

[Operator]

[Operator Instructions] Our next question comes from Jeff Garro with Stephens.

[Jeffrey Garro, analyst]

Follow up on that last one and also some earlier ones on the momentum for Crossix. I was hoping you could discuss the the mix of customers' commercial focus on digital versus in-person spend and how Veeva is particularly differentiated there to to enable both digital and in-person commercial activities and help your customers evaluate the effectiveness of both.

[Peter Gassner, executive]

Yes. In terms of the mix, I didn't notice or sense any broad change in mix. Now we're not always in those discussions, but I didn't notice them anymore. But what I did notice is, hey, using technology, particularly crosses, can I have the same amount of spend in digital and double the impact right? That's really what Crossing. Now in terms of the field or the CRM, I think there's a lot of excitement about AI to say it's not easy to ramp up or ramp down my field force. So what I can do is I'd like to keep that field force the same roughly and just get more productivity out of money out of my team as they have more launches and more content. So I think that's what I'm seeing there. .

[Operator]

And our next question comes from the line of Andrew DeGasperi with BNP Paribas.

[Andrew DeGasperi, analyst]

Maybe as a follow-up to the horizontal Sierra product. You mentioned it's a different team. I guess I'm wondering, number one, is have those investments been made in terms of people and headcount, is that already in place? And then secondly, is M&A on the horizon for this particular product? Or is this something properly related to another opportunity?

[Peter Gassner, executive]

Yes. The core team is in place. Of course, we'll be adding to that team incrementally when you you have to keep the team small at first, so it can execute with really fast speed and quality on the foundations. And then you incrementally add to that team, and I'm sure we'll be doing that. over the next 2, 3 year, 2, 3, 4 years. So that's normal and we have a [ heart beat ] for that. And I'm sorry, so that was about the Team. And then you asked the second question, I didn't catch it. .

[Andrew DeGasperi, analyst]

It was on M&A. I know you mentioned this would be an area that you'd focus on. I'm just wondering if your -- M&A will be focused on the CRM product? Or would it be for other areas? .

[Peter Gassner, executive]

Yes. For M&A, we're keeping a really wide aperture on that. If we can see something that would be synergistic with Veeva most likely that would be in the area that is horizontal applications, could be CRM could be other things. We would look at that. We've been very disciplined on our acquisitions, and we've not had any failed acquisitions, and that's unusual. So we like acquisitions like Crossix where we can really create a lot of value and create a lot of innovation. So that's the type of thing we've been looking for. outside of life sciences, it could be in CRM, it could be in a different area.

[Operator]

And our next question comes from the line of Gabriela Borges with Goldman Sachs.

[Gabriela Borges, analyst]

I'd like to follow up on some of the positive commentary on eTMF with asking you about an update for EDC. Peter, perhaps you could comment how are some of those conversations progressing on new customers for EDC? And any updated color on how we should think about the ramp of revenue for the customer wins that you've already announced?

[Peter Gassner, executive]

Yes. You touched on the eTMF and I'll just spend a little bit there. I'm -- we're really excited about that. [ 19 is top 20 ], and we feel like we have a pretty good path to have 20 of the top 20 on a eTMF. That's -- that's just amazing, and we view that as just an honor. And what we want to do when we get that simplification as standard relation to the industry is just double down and invest and help the industry get more efficient.

So I want the whole Veeva team to know and yourselves as the investors and our customers to know is that's a signal to Veeva to really double down on investment that's the type of company Veeva is. We view that as a privilege. So eTMF is there. And I'm confident over time actually EDC will get there. I think but it will take time. Today, we have 9 out of the top 20 are using our EDC. Now some of those are very early and those are multiyear ramp deals. I think we have a path to additional top 20s in EDC. I don't see anything imminent right away, but I'm sure customer success will get there over time because we have a structural advantage. People want to integrate a clinical platform in the clinical operations, clinical data management, even reaching out to the research site. So if we keep executing our teachers very bright in clinical.

[Gabriela Borges, analyst]

Congratulations on the strong 1Q

[Operator]

And our next question comes from the line of Allan Verkhovski with Scotiabank.

[Allan Verkhovski, analyst]

Congrats from me as well on the great quarter. I want to just double-click on how you mentioned discussions with customers that are starting to reflect the general unease. Can you give more color on how that developed through the quarter? What types of customers are expressing this more? Just in general, I appreciate more color on this.

[Peter Gassner, executive]

Yes. That color is things that we get in personal conversations, namely one-on-one conversation sometimes by him, sometimes in person. So it's not anything that shows up in the financial results of the pipeline. So you would expect, it's mostly face some people are concerned about drug launches, and they're concerned about what's called the PDUFA date, their approvals and they see some open vacancies in the FDA and they wonder if he's going to fill those and whether they're going to fill those in time so they have a little objective there. .

There's people concerned about what types of acquisitions they might do? And if they might be them, well, is there going to be an impact on drug pricing, the executive order because that may deter or accelerate their plans for acquisitions. So it's just broad-based across life sciences. And then for the smaller biotechs, what they would be wondering about is how is this going to affect the funding environment is pretty dynamic with which way will interest rates go and how will this affect funding and then watching the price of bonds [indiscernible] they're wondering, well, when we need another round or we going to get it. So should we need to be more conservative or not? So those are the type of discussions it's varied, not dominated by 1 particular topic.

[Operator]

And our next question comes from the line of Steven Valiquette with Mizuho Securities.

[Steven Valiquette, analyst]

Let me offer my congrats on the strong results as well. Really, for me, just a financial question. The 79% non-GAAP gross margin operating margin were obviously pretty strong in the fiscal first quarter and the guidance for the fiscal second quarter and for the full year imply that the margins will come back down a little bit relative to the F1Q trend. I guess just getting too specific, is there anything high level you can point out 1 or 2 factors that just mechanically might bring the margins back down in the remainder of the year versus fiscal 1Q.

1

[Brian Van Wagener, executive]

Stephen. Q1 was a great quarter for the collective Veeva team, and you saw that reflected in the margins. The part that doesn't always show up in the margins is the impact that we'll see in years to come. When you look at the margin specifically in the quarter, about 3/4 of the outperformance was driven by revenue.

And so that was mostly the usage-based elements of Crossix and the faster timing of services delivery. So things that we don't expect to be a recurring benefit to margins through the balance of the year. We also saw some benefit from expenses, which was really timing related factors as well, things that occurred later than we'd otherwise expected. And so when you put all that together, we saw a high watermark for margins in Q1 and then we see it return back to 44% in Q2, which is about what we expect for the balance of the year.

[Operator]

And our next question comes from the line of David Larsen with BTIG.

[David Larsen, analyst]

With regards to Crossix, you mentioned investments in the Crossix and you mentioned the word provider. Just with respect to the actual data itself, does it include like obviously, the retail sort of data. But does it also include like the specialty script data for medications that could be supplied in a hospital? Does that include like Part B drugs, drugs administered in the clinic and a skilled nursing facility. And then when you use the word provider, would that also include like facility data. So if a hospital wants to look at all of their volumes, inpatient, ambulatory and so forth, is that also included in Crossix or are there plans to eventually include it there?

[Peter Gassner, executive]

Yes, the data sources, the data network, which supports Crossix and it also supports Compass. It does work for retail, specialty drugs, specialty pharmacy administered in the hospital, all the type of drugs and especially is good at what we call complex therapies, and those are definitely ones that are -- you're not just going through a retail pharmacy and picking them up. That's 1 of the very unique things about our data sourcing strategy. So for example, Encompass.

I know you asked about Crossix, but for example, Encompass we can project data sales data for about 4,000 brands across retail and non-retail. And we can do that because of our data sourcing strategy. That data sourcing strategy makes us able to do great measurement and audiences also on Crossix. So in Crossix, what you're trying to do is figure out what segments do you want to expose to media. And then was that effective at which media points was that effective at driving visits to health care providers and then resulting in the uptake of the right medicine. So it's a pretty comprehensive data network. That's what we set out to build when we acquired Crossix about 5 years ago, and it's really really great to see it coming to fruition now.

[Operator]

And our next question comes from the line of [indiscernible] with William Blair.

[Unknown Analyst]

I guess just diving into [indiscernible] again, you said that customers are feeling good about Veeva. But maybe from a broader industry perspective, what challenges were they bringing to you? What's top of mind for them? And has there been any shift when you compare the conversations you've had back in April to maybe more recent conversations you've had reasonably as we continue to try to navigate the changing environment.

[Paul Shawah, executive]

Yes. So I'll take that. Yes, it's a good one, challenges and has that shifted over time. So remember where the industry is. They've been in a place where in the commercial side, we've helped many companies be able to connect up a lot of their software systems. We now we're going through the migration process. So that's certainly a big topic of conversation. But we -- the industry still has fragmented data and getting the data to work together, getting the data into the software so you can make decisions and you can get insights fast about that. That is still a challenge for the industry. It's not a solved problem yet. So the topic of our -- you heard Peter talk about this, connected software, connected data that's resonating, and it's a challenge that it's very clearly an unsolved problem in the industry, and our approach to that, harmonizing the data sets, formalizing it with the software fundamentally solving it at a very foundational level, the data model consistency of data attributes and elements across all these different data sets, creating this connected environment.

So that's top of mind, and that leads to things like helping them be more efficient, helping them get insights to the right people faster and make decisions, helping them do AI. So that's an area. And then second is we talked a lot about the excitement around AI, but there's also a lot of unsolved problems in the AI space. And part of that is bringing together or the industry hasn't yet been able to bring together very industry-specific processes with deep industry-specific AI. That's a problem that they've made investments. They haven't often seen the full return on their investment in some of the AI projects. And I think that's another area where they're excited about our ability to help them over time. So those are some specific examples.

[Operator]

And that concludes our question-and-answer session. I will now turn the conference back over to Mr. Peter Gassner for closing remarks.

[Peter Gassner, executive]

Thank you, everyone, for joining the call today, and thank you to our customers for your continued partnership and to the Veeva team for your outstanding work in the quarter. Thank you.

[Operator]

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.