Veeva Systems Inc. (VEEV) Earnings

Management highlights

- Overall Business Performance • Viva delivered a strong start to fiscal 2027, with total results coming in ahead of initial guidance, with strong execution across all business lines • The company is positioning itself as a leader in industry-specific AI for life sciences, building on its existing core of applications, data, and consulting services - AI Product Strategy • Viva Falcon is the company's new disruptive agentic AI offering, focused on delivering pre-built industry-specific AI agents that automate high-volume, repetitive labor roles in life sciences, rather than offering a general platform for customers to build their own custom agents • Initial target use cases for Falcon are clinical trial document processing, safety case triage/categorization, and regulatory health authority correspondence; pricing is expected to be usage-based (per document for clinical work, per case for safety work) • Vault AI provides embedded AI assistants for human users within existing Vault applications, supporting user efficiency while humans retain responsibility for higher-value work • Early adopter commercial AI agents have launched successfully, with more than 10 customers already live, and the company plans to scale commercial AI adoption through 2027 - Key Business Updates • Vault CRM (commercial) continues to deliver strong results, with an 80%+ win rate, over 150 live customers, and 10 wins out of the pre-defined top 20 large biopharma CRM targets; 4 decisions remain for 2027, and management expects to win the majority of these • OSTRO, a newly acquired compliant AI-powered brand engagement platform for biopharma, is operated as a startup within Viva to retain agility, and integrates with existing commercial offerings including Cross-X and open evidence channels; it enables instant compliant answers for healthcare providers and patients and unlocks new commercial evidence insights • Cross-X continues to gain market share driven by ongoing product innovation including support for new digital channels like open evidence, with a diversified customer base across therapeutic areas and limited concentration risk • Development Cloud has a strong pipeline of deals, with expanding scope driven by new initiatives including the e-source program for direct clinical data capture from research sites; no large top 20 deals closed in Q1, which is attributed to timing, and the overall pipeline remains strong • Viva Basics (small biotech offering) has a standardized product configuration that makes it an ideal early adopter for Falcon, as the standardized setup allows Falcon agents to work across all Basics customers without extensive customization

Guidance

- Full-year guidance was only adjusted minimally: the full-year revenue guide was increased by just $5 million overall, with $10 million of the $15 million increase in commercial subscription revenue attributed to the OSTRO acquisition, which closed late in Q1 - Management maintained its full-year non-GAAP EBIT margin guidance of 44%, with Q1's 45% margin reflecting an outlier quarter from strong Cross-X performance and shifted expenses, and current guidance already accounts for planned growth investments across AI, data cloud, and acquisitions - The R&D segment's strong Q1 outperformance reflects the natural scaling of early-cycle products; the conservative guidance adjustment is not tied to hidden headwinds, and management remains confident in full-year performance aligned with existing guide - Management expects AI revenue to be immaterial for full-year fiscal 2027, as the company prioritizes product and customer success over near-term monetization; any AI-related margin impacts are already factored into guidance and are not expected to be material for the full year - Guidance assumes the macro environment remains unchanged from the time of the prior guidance release; management sees overall strong, healthy end market demand across both commercial and R&D segments, with only minor pockets of relative strength/weakness that are already factored into guidance

Segment performance

Segment-level revenue and absolute performance figures are not broken out in the provided transcript. Total company revenue for the quarter was $883 million, with non-GAAP operating income of $395 million, results that came in ahead of management's initial guidance. Professional services delivered a record quarter in Q1, with broad-based strength across implementations, business consulting, and non-deployment work including digital events, driven by strong execution in R&D and business consulting, with Vault CRM migrations contributing to year-over-year growth but not as the primary driver of outperformance. Cross-X (commercial measurement and engagement) posted another strong quarter with durable growth, diversified across multiple clients and therapeutic areas with limited concentration risk. R&D (Development Cloud and Quality Cloud) saw strong outperformance in Q1, outpacing full-year guidance by a few percentage points, driven by scaling of early-cycle products including ECOA, RTSM, UDC, Safety, and LIMS.

Risks & headwinds

- Forward-looking statements (including guidance and AI product expectations) are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, as detailed in the company's most recent Form 10-K filing - The company has no obligation to update or revise forward-looking statements after the date of the call if underlying facts or conditions change - AI product development and commercialization is a new, unproven market for Viva, and there is uncertainty about customer adoption rates, pricing model success, and long-term profitability of agentic AI offerings - Large deal closing timelines are unpredictable, and there can be quarter-over-quarter variability in large top 20 deal wins that does not reflect underlying pipeline strength - While management does not expect material cannibalization of existing Viva revenue from Falcon, it acknowledges that long-term market impacts of AI automation are difficult to predict fully - Increased compute costs associated with AI scaling could impact margins, though management notes any impacts this year are expected to be immaterial and already factored into guidance

Analyst Q&A

• Q: Can you expand on what Viva Falcon targets, and how it interacts with your existing BOLT and SELCAN offerings? /

  A: Falcon is Viva's entry into agentic AI labor for life sciences, a new disruptive market that was not possible before modern probabilistic AI. Unlike embedded Vault AI that assists human users working in existing applications, Falcon fully automates complete standardized job functions that were previously done by humans. It requires Viva's existing applications to operate in a headless mode, integrating with rather than replacing Viva's core product portfolio.

• Q: Why will small biotech Viva Basics customers be early Falcon adopters instead of large enterprise pharma customers? /

  A: Viva Basics uses an entirely standardized product and process configuration, with identical setup across all Basics customers. If a Falcon agent works for one Basics customer, it will work for all, eliminating the customization and adaptation work required for large enterprise customers that have unique Vault configurations. Larger enterprises will require additional adaptation and testing, so Basics is a natural starting point for early Falcon rollout.

• Q: What is the strategic rationale for the OSTRO acquisition, and how much did it contribute to the full-year guidance increase? /

  A: OSTRO is a compliant AI engagement platform that lets biopharma deliver instantaneous answers to healthcare provider and patient questions directly on their digital channels. It integrates natively with Viva's existing commercial offerings, including Cross-X measurement and open evidence channels, and unlocks new commercial evidence insights by capturing unfiltered user questions. OSTRO contributes ~$10 million to the remaining three quarters of fiscal 2027, accounting for two-thirds of the $15 million increase in full-year commercial subscription guidance.

• Q: Why did you only raise full-year guidance by $5 million after R&D outperformed full-year guide by a couple points in Q1? Is there hidden downside we should expect? /

  A: The minimal guidance increase reflects the same dynamic we shared at the start of the year: R&D's strong growth is driven by early-cycle products that are still scaling. We are very happy with Q1 performance and the momentum from the quarter, and the conservatism is not tied to any hidden headwinds or expected weakness in the back half of the year.

• Q: What is your update on top 20 large pharma CRM migrations, and how many do you expect to win? /

  A: We have 10 wins out of our static 5-year-old top 20 list so far, with 4 decisions remaining to be made in the rest of 2027. We have an over 80% win rate in CRM this year, and we expect to win a majority of the 4 remaining decisions. We do not comment on a specific final number until all decisions are finalized.