Good afternoon. My name is John and I'll be your conference operator today. At this time, I'd like to welcome everyone to Veeva Systems' Fiscal 2016 Fourth Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Rick Lund, Veeva's Investor Relations Director. You may begin your conference.

Good afternoon and welcome to Veeva's fiscal 2016 fourth quarter and year-end earnings call for the quarter and year ending January 31, 2015. With me on today's call are Peter Gassner, our Chief Executive Officer; Matt Wallach, our President; and Tim Cabral, our Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, our strategies and the anticipated performance of the business. These forward-looking statements will be based on management's current views and expectations and are subject to various risks and uncertainties. Actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q, which is available on the company's website at 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 1, 2015. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter, unless we do so in a public form. On the call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website, and as an exhibit to the Form 8-K filed with the SEC just before this call. With that, thank you for joining us and I will turn it over to Peter.

Thank you, Rick. Good afternoon and thank you for joining us today as we review our fourth quarter and fiscal year 2016 financial results. We had an outstanding Q4 and a great year. Revenue was above our guidance with total revenues of $114.3 million, up 31% year-over-year. Subscription revenue was $90.4 million, up 36%. We delivered non-GAAP operating income of $25.2 million, a strong performance but slightly below our guidance due to higher sales commissions expense on bookings that were well ahead of our expectations. Q4 was a blow out bookings quarter. This is significant for Veeva and I'll give you some color on our bookings. First on the CRM side, we had exceptional performance with one of the most significant CRM bookings' quarters in the history of the company. We had an important strategic CRM win in Q4 with a Top 10 pharma that was not previously a Veeva CRM customer. While the actual bookings from that new customer is small at this stage, since it's just a start of a large regional rollout, we believe success here can lead to a large global project over time. Our other major CRM rollouts are still on track and we're seeing strength across industry segments and regions as well and now we're extending our leadership position in CRM, which provides a solid base from which we can grow. Expansion in the multi-talent CRM continues at a solid pace. We had another good quarter for COM and Approved Email. 30% of our CRM customers now used Approved Email in at least one region. We also have seen good traction and pipeline build for our newer products; Veeva CRM Events Management and Veeva Align released just last summer. Our initial implementations are going well and we had our first go live for Align…

Thanks, Peter. Q4 showed strong top line momentum. Total revenue was $114.3 million, up from $87 million one year ago, a 31% increased. This wrapped up a fiscal year in which total revenue was $409.2 million, up from $313.2 million in fiscal 2015, also a 31% increase. For the fourth quarter, subscription revenue was up 36% to $90.4 million from $66.5 million last year. Subscription revenue benefited from a core new bookings performance that was an all time high for Veeva. For FY '16, subscription revenue was $316.3 million versus $233.1 million in the prior year, up 36%. For the year, CRM was up 20% consistent with our guidance and non-CRM grew 158% including the revenue from the Zinc acquisition surpassing our guidance of north of 100%. Our business model is built around driving customer success and delivering increasing value to our customers over time. Our focus on these goals drove 125% revenue retention rate for the full fiscal year '16. This metric is defined in our 10-K and reflects annualized subscription revenue growth of our business within existing customers, net of revenue attrition. We are especially proud of this metric, as I believe that it reflects a very high level of customer satisfaction. Services revenue for the quarter was $23.9 million, up from $20.5 million year-over-year. This was down sequentially from $25.2 million in Q3 consistent with my Q3 commentary and consistent with the seasonally lower utilization rates associated with the holidays. Overall, our subscription business continues to grow faster than our services revenue. For the quarter, the percentage mix rose to 79-21 subscription versus services, a 3-point shift year-over-year to subscription and for the full year the mix was 77-23 respectively, also a 3-point shift towards subscription from fiscal 2015. In discussing the remainder of the income statement,…

[Operator Instructions]. And our first question comes from the line of Tom Roderick from Stifel.

Hi guys, good afternoon. Thanks for taking my question. The first I wanted to ask, you mentioned very early in the script about an important CRM with a Top 10 pharma and I think there's very few left that you guys hadn't won at this point. Can you talk a little bit more about what that competitive environment might look like? What the opportunities can be as you look to extend your footprint across the CRM framework for that customer? And maybe anything you could share on scale or timing or what might enable you to get deeper over the next couple of years with that customer?

Sure Tom, this is Matt. So you're right, there weren't too many left, but this is a company that we've been in contact with for many years. We started the first CRM project, which is one division and one country and like other top 10 pharmas this can be the start of a much broader global program. Just as importantly, it's also the entry point for us to sell all of our other products. So this is a company that had not bought any Vault, any Network, any OpenData from us and as we've talked in the future, these are very, very large opportunities for us with the largest companies in the industry. So we're very encouraged by that. Obviously it was a lot of work over many years to position ourselves for that and I think that it will be a company that you will probably see in the headlines going forward.

Very good. Congratulations on that, looks like a very good one. The Vault side of the -- non-CRM now being expected to grow over 100% this coming year again, the momentum continues there. Can you talk about any sort of shifting demand that you might see relative to eTMF was very strong throughout the first half and mostly this year and now you're starting to see some other opportunities across different types of the Vault product line. So would love to hear where the momentum lies in that? What Zinc Ahead is doing for you on Vault and how you think about eTMF in the product portfolio for Vault right now?

Okay, this is Peter. There is two sides of Vault, one is the R&D side and one is the commercial side. The commercial side is where the Zinc is and there it's really about the acquisition of Zinc and their domain knowledge, it's really made it the clear leader there and we see accelerated momentum there. But the bigger story for Vault is on the R&D side. We've got started on eTMF, it was the first application we really gained traction with that there. And that continues today, that momentum has not tailed off, it's continued, we're in the nice part of that market. But the changes really over the last 12 months that we're seeing that same type of momentum on the regulatory and quality side. This is a type of momentum that we saw previously in eTMF and now the regulatory and the quality are catching up. And it's a very great dynamic for Vault, because there are three distinct areas, but they are also related together and we are the only provider that has a solution that spans all these three areas and that's the excitement that they can really transform the R&D side with these integrated set of products.

Thank you for that. And then Tim last quick one for you. On the billings, I was writing fast and furiously here, with what you had to relay in the fourth quarter. So if I heard you right, you had an extra $14 million this quarter relative to longer contract terms or billing terms with some customers or maybe something that got signed a bit earlier or the contract terms got pulled in a little earlier. So roughly speaking, I think maybe your deferred number was something like $24 million, $25 million above where we were at, but roughly maybe half that or a little bit more half that was due to timing differences and the other half would have been sort of perceived as a core beat relative to how you are encouraging us to think about the deferred number for the fourth quarter. Is that a fair assessment?

Yes. So Tom a couple of things in there. The $14 million that we referred to was a combination of primarily two customers that shifted their contractual term in the favor of Q4 billings, which where the $14 million came in. So one actually move from a quarterly biller to an annual biller and their annual subscription renewal date was in Q4 and another one actually consolidated a number of different renewal dates into a Q4 renewal date. So if you remember some of the things we talked about last year in terms of renewal dates moving out, this was the opposite of that, which meant there was a tailwind to Q4 billings. In terms of the overall comparison between the 23% to 25% that we guided on in the last call and the 47% we did, you're right. I think it's more of a 60-40 split with the 40% being in part the booking outperformance that both Peter and I mentioned. And that was a combination of some pull forward deals, some accelerated deployments, but also some really strong field execution that enabled us to have that, as Peter characterized, as below our bookings quarter.

Our next question comes from the line of Karl Keirstead from Deutsche Bank.

Thanks. First of all, congrats, it's obviously pretty rare for a software company your size to launch a second product and have it take off like Vault. So pretty amazing progress. Congrats on that. I've got two, Peter, you sort of alluded to more aggressive investing and building out new products in fiscal '17. Just so I'm clear, are you talking about expanding, the existing product segments or much you had be referring to the launch of an entirely new? And then for Tim on your fiscal '17 billings guide, if I heard you correct, tell me if I'm wrong, but I think you mentioned Q1 billings growth of 42%, full year 23% to 24%. But that would imply a fairly stick sell in quarters 2Q through 4Q. At first glance that seems pretty conservative and doable. Maybe you could just touch on why it would have that kind of [suite pattern]? Thank you.

Okay, Karl. As to the investment, that's really though in the product area and in the field area. In the product area, we have products in various stages of their lifecycle, the primary investment is in the newer products, which we have announced and also in products that we're building or may build and haven't announced yet. So it's really, really both. We think this is a great time to invest. It's a great year to invest, because really profitable companies are back in fashion. And there's a question about the speculative part of the broader tech market and this is what I've seen before. When that happens it's a great time to get for potential employees, because they start seeking quality. They move to quality organizations and companies also look for stable partners who would -- rather than more speculative. So yes, short answer is, both in existing newer products and we'll also invest for the future, this is a great time to do it.

And Karl, picking up your question on the billings guide contracts in Q1 and billings guide to the rest of the year. A couple of things we keep in mind there. Number one as you recall last year, we did push some renewal billings into Q1 from last year, if you will. So that shows in the growth number that we're talking about in terms of 42%. The other thing that Tom brought up, which is the $14 million that we pulled into Q4, will impact Q1, 2 and 3, which will drive that down without any real tailwind. However at the end of the day, the quarter-to-quarter volatility in billings is one that we may continue to see given the sub order nature and the coterminous nature of some of our contracts as well as we talked about the potential movement in some of the customer contracted terms from one quarter to the next. So the overall billings guidance of 23% to 24%, which is on total billings, we're happy with and remember in that is a services revenue line, which you heard in my comments were -- is only slightly up year-over-year. So the subscription billings growth on that is due to 5 or 6 points higher.

Our next question comes from the line of Richard Davis from Canaccord.

Hi. Thanks very much. So first you kind of touched on this before, but this is kind of a take rate question in terms of, if your current customer base bought all of your modules that you have today, would your run rate be close to the kind of double or triple? I am just trying to figure out the same store sales line and then a quick follow up.

Sure Richard this is Matt. So, I'll take that a couple of angles. So if you look at the total numbers here on customers 212, 40% of those companies have bought Vault, so 60% of those companies don't have any Vault. And if you look at the Vault customers, 219 Vault customers, only 40% of those customers also have CRM. And so just within the two large products that we have, we can cross sell 60% more to both sides. And then importantly once they have one part of Vault they still have a lot further to go because there is multiple applications there. So, I haven't done the math on whether it's double or triple, but clearly there is a long runway within even just the 400 companies because we're really minimal penetrated across all of the product lines in those 400 companies.

And then Tim, can you talk a little bit about this on the almost [indiscernible] stuff. When we think about longer term becoming more of a multi-vertical SaaS how do you think about the puts and takes on a go to market effort there because we still get questions on that? I mean not for nothing every great company has gone to more than one single vertical, but anyways if you could help us on that that'd be great. Thanks.

Richard this is Peter. For now we're really focused on building our industry cloud for life sciences. We think it has a long runway with existing products, new products that we build and actually think it's actually under estimated. So we're going to focus on there. Of course we are building its core technology assets the Vault Platform and what we have mentioned has a lot of capabilities that could be used in other places, other industries. But that's probably something for another day to contemplate. So we're really doubling down on our industry cloud for life sciences at this time.

Our next question comes from the line of Sterling Auty from JPMorgan.

First question is a little bit of along the lines to what Rich was asking, if you look at Vault and specifically the customers that you've got, if you never added another Vault customer but just fully penetrated what you have. How much more revenue run rate is available within those customers just for Vault?

Sterling it's Matt. So, if you look at the total potential within Vault just within life sciences, we haven't even reached 5% penetration yet. And so within the existing customers or in the 219 customers, slightly above 5% but we're not starting to talk about 20%, 30%, 40%, we're nowhere close to that, even our largest Vault customer still have a lot of runway. So, we are really minimally penetrated with Vault overall and there isn't -- I can't think of any large company where there isn't a Vault sales cycle to either start or to cross sell in addition to where they are today.

But does that mean that if you're less than 5%, if you mention the Vault run rate was $100 million exiting the quarter, does that mean actually just within the customer set there is a $2 billion opportunity for Vault?

No, what I mean is across all of life sciences. So we're at 219 Vault customers today. There is probably 2,500 potential companies within life sciences across both commercial and R&D that could buy Vault. And so there is still larger opportunity outside of the current install base. But even within the current install base we're nowhere near fully penetrated.

But that's all the same. If you got $100 million run rate within the 219, could that $100 million of run rate, to Rich's point double, triple, quadruple, what is the -- just so we understand, how quickly somebody adapt Vault within the customer so we could think about as you're growing moving forward how that might sell?

So I would need to do a little math before I could answer that more specifically. So why don't we take that as an action and we can look at within the install base. But more kind of higher level as we think of Vault broadly within these large companies, it's one of the most important and really not optional areas of spend. And we gave the growth number that all of our non-CRM will grow at 100% again this year in subscription revenue, Vault grew 100% last year. We guess we had a lot of new customers but a lot of that growth is large and small companies having success with their first Vault application and expanding. But I think what we are to do first is to do a little math and to get back to you on the other part of the question.

Our next question comes from the line of Bhavan Suri from William Blair.

Nice job there on the numbers. Just to touch a little bit on the sales investment and what you guys are making. You've seen pretty healthy sales of Vault and even Network and Data now across the CRM base and non-CRM customers. So just a sense of where the go-to-market investments will be? And sort of what do you think are the gaps that you need to fill given that you sort of manage to penetrate those bases pretty quickly for Vault say? And certainly seeing good attach rates for the CRM products, what do you think you need to invest in and what does that do for the model?

In terms of the -- I will let Tim to handle the model question, but in terms of the overall areas for investment, it's really across the board. Although I would say it's more on the R&D side of life sciences than it is on the commercial side. And when I say across the board, it's in all product areas. But it's also investing for scale as we get larger customers where we have a larger revenue relationship, we need more coordination on those very large accounts. So investing in that area in global account management type of capability and just across the R&D area as we get more customers both to pursue new customers and to manage our existing customers. In terms of the model. Tim?

Yes, I guess Bhavan, I would say in terms of the models our belief and our confidence is unchanged from the model we talked about in the Analyst Day in September of last year, both at the potential operating income at $1 billion in revenue run rate as well as the investment areas as you saw there like sales and marketing in R&D spending.

Got you, got you. And then I mean just a couple of more quick ones on Vault over there. Firstly, obviously in the Analyst Day now, September's timeframe and you guys were pretty confident about Vault that, with billing you had the growth rates you saw, does it feel like that even upticks -- and then you are welcome to sort of being conservative about this, but does it feel like the uptick has it meet your expectations or exceeded your expectations even in the last few months? And then as you talk these large pharmaceutical companies like sciences, biotechs, have you seen any impact from certain macro concerns, are there a delay that you might be seeing despite sort of the strength in billings, any conversations about sort of, we are okay with what we have even though its legacy, we are just going to wait on maintenance streams for now, any of those types of conversations?

In terms of Vault, time has passed since September, so we have new data points. So I guess we are even more optimistic and where is that optimism even coming from. It's just from increased customer deployments and increased touch points, increased -- actually hiring, the availability of great engineers in the Silicon Valley to bring them into the Vault team. And probably just broadening in terms of clinical, regulatory and quality for the broadening footprint. Competitive environment still benign so as time passes yes, I think you get you more certain and more optimistic. In terms of the macro environment for our customers, Matt you want to pick that one?

Sure, yes, so we don't see any change from the macro on our customers. We continue to see strong demand for our product supply across both commercial and R&D. But remember life sciences is less cyclical than most other industries, but in fact it's been very strong the last couple of years. There has been more product approvals in the last two years than any two years combined in like 60 years. So like since the 1920s or 1930s. So the life sciences industry is really vibrant right now. Our customers are strongly talking about cures where they were talking about treatments before and so when there is big opportunity like that in front of them, we think that they are going to continue to investment aggressively where they see the opportunity to drive incremental value or efficiencies.

You are really helpful. You touched on sort of clinical trials a couple of times, and I will squeeze one last one if I may. Just an update on the CRO opportunity, so you said it was 2,500 potential organizations that could be targeted for Vault. Just something, does that include the CROs and how are the CRO deal pipelines or customers coming along? That's it for me. Thank you.

Sure. So on the CROs that is included in the 2,500, total number of companies. The CROs we kind of think about in two ways. Sometimes a CRO will want to use Vault internally and we have CROs, a lot of them that use eTMF obviously. But we also have CROs that use the Submissions product because they have created outsourced submissions offerings and we have CROs using that for quality. One of our CRO customers has more than 10,000 users using the QualityDocs that we quote application internally for all of their SOP management and Read and Understood functionality. And then the other way that we see -- think about the CROs is as partners because our customers outsource to them, so they need to use Vault on behalf of their customers. And so we see the CROs, yes they are a target customer but they are also an important partner for us in the way that we are supporting our customers.

Okay that's helpful. Thank you guys.

Our next question comes from the line of Kirk Materne from Evercore ISI.

Thanks very much. I guess just to stay on the topic of Vault. I was wondering, given that Vault is becoming more strategic to your customer base, are you starting to see more of your traditional system integrator partners start to think about Vault and how that can play into sort of bigger business transformation projects that they might be working on? I'm just wondering, if you're starting to see them pick up any interest around helping pull Vault into deals along with you guys or working with you around Vault?

Yes Kirk, this is Matt. So on the question specifically, is it business transformation or is it kind of technology swap out, it is clearly business transformation. And so we've been in touch with the larger systems integrators, some companies that we worked with on the CRM side, but also new companies that see this as a way to become an important Veeva partner. When I look at the potential of really dramatically improving the business process is around clinical and RIM submissions. It's really massive. I spent a morning with the Head of Regulatory at one of the top 10 companies and there is just a tremendous opportunity for us to enable business process improvement for this company. What I've always thought and what they reiterated is so many of the business processes in this industry, are organized around system limitations and when you remove those system limitations, you can really start to optimize. So yes, the systems integrators see this opportunity. We're talking to many of the largest and I think that this is going to be an ongoing theme with us in the Vault area.

Great. That's helpful. And just one more for me, along the same lines. One of the legacy players in the broader ECM market is actually going through more of a business transformation of their own right now, has that helped at all in terms of the competitive dynamics for Vault? You guys were obviously doing very well on your own to begin with, but has that opened up more discussions as they realized at that company, there's an ownership transition going on?

So the competitive environment in Vault sort of feels like, we compete against more the memory of some of the legacy companies versus their current products. Because so many CIOs and so many business leaders want to go with the cloud, upgrading an old on-premise software or implementing a brand new one is really not preferred. And so it feels like we compete against more focus companies that are life sciences only, that are more best-of-breed vendors. And so that leaves us as the only company that has a broad suite that can cover more than one or two areas. So I actually don't think that that ownership change has made a big difference. I think there certainly will be companies that look at that and wonder about investing more in an old platform particularly as it's going through an ownership change as you mentioned. But that's actually not the major competitive dynamic. The major competitive dynamic is that we have a very, very strong value proposition and moving to the cloud for these kind of old, clunky, content management processes has proven to be a really valuable thing for our customers.

Great. Thanks very much and congrats on the quarter.

Thanks.

Our next question comes from the line of Scott Berg from Needham and Co.

Hello, everyone. Congrats on a good quarter. Two quick questions for me. First of all, can you comment on the bookings strength in the quarter? I'm just trying to gain a little bit more color in terms of where all the strength was? Obviously, the overall commentary was pretty strong. But maybe North America versus outside North America, upsells versus new customers, just trying to understand some puts and takes there a little bit better. That would be great.

On the bookings, it was really a combination of quite a few things. First of all one of the things that it wasn't, there was no -- not dominated by any mega deals or mega customers that was really broad based. It was a strong quarter for CRM and non-CRM and then there is kind of three components, sort of I think that played out. We did have some pull forward from the Q1 into the Q4 and that happens sometimes. We had some accelerated projects and when that happens, when projects accelerate then licenses get pulled forward. But we also had great field execution and that is -- that was certainly a component of that I think. We did some investments in the field towards this summer last year, early part of the summer and those things are, I think paying off and great execution. And then the product areas, it was just broad across the board, core CRM, new customers, existing rollouts, CRM add-ons and involved clinical, quality, and regulatory. I would say as always, since we have a lot of customers in life sciences, I'd say that both of it was new projects, new divisions, new countries and existing customers broadly speaking that will outpace the brand new customers. So it was remarkable in that I guess breadth and depth, it was very balanced.

Great. And I'm sorry, my last question was for Tim, really quick. Tim, on the services gross margins, they've been kind of trending lower for a couple years now, although it looks like they flattened out a little bit in fiscal '16. Do we get to see them kind of normalize closer back to that 30% level over the next year, given they're growing slower or should we continue to see them kind of sub 30%?

Yes. I think in these times, Scott, when we saw our services gross margin up in the high-20s to 30s, it was really I will use the term, that either you throw out service revenue quarters. So as we think about our target utilization rates, we are comfortable with gross margins in the 20s, which is how we think about our utilization rates for the services business. And as you know there will be some quarter-to-quarter movement there as maybe some big fees move in and out of quarters or large projects move in and out of quarters. The 23% you're right was on the lower end but still we see in our target utilization rate. And then the last thing I would give a little bit of a color on is as Peter talked about and I talked about some of the investments we're making with the migration of Zinc PromoMats, those costs are sitting in our cost of services arena, which will have a little bit of a headwind to our services gross margin in the near-term.

Our next question comes from the line of Kenneth Wong from Citi.

This is Rich Hilliker sitting in for Ken Wong. Just a quick question here. We were wondering, should we expect to see non-CRM bookings continue to exceed core CRM, or do you think Q4 was kind of an anomaly?

I guess I'll take that one. So, non-CRM bookings and CRM bookings, as you can see in our revenue guidance we have Vault in general the non-CRM revenue growing at a faster pace than the CRM revenue and that will be really driven by bookings of new business. So, in general we don't give guidance on the specifics but as of bookings we decided to give a point in time status on it because of our Vault bookings quarters. But I think implied is that the Vault business is growing faster than the CRM business and that's primarily going to be driven by new bookings.

Okay. Got you. And just a quick follow-up. You guys mentioned your fiscal '17 op margins are going to be roughly flat, around 26%. I think I also heard you say something about investments coming forward. So just kind of wondering, what that means for op margins, long term? Is this kind of a trough going back to 28% to 32% area, or maybe a little bit of commentary about that would be really helpful? Thanks.

This is Tim. And part of your question broke up, I am sorry, but I do want to make sure we clarify the FY '17 guidance that we gave for operating margins -- actually the operating income implied on operating margin of between 24% and 25%. So annually it's not flat from what we saw in fiscal '16 to fiscal '17. As we think about the longer term or the five year model that we discussed in the Analyst Day last September, we definitely remain confident that this is a business that can drive the margins we discussed in that venue, add $1 billion revenue rate. One thing to note is as you look at our guidance in fiscal '17 and we gave two pieces, one the full year guidance and the other one the Q1 guidance. We do see a sequential growth in operating margin over the course of the year with Q4 roughly in the neighborhood of probably the 26% to 27% range, which we look at as being fairly close to the range that we talked about in the Analyst Day as we talked about our 2020 operating model.

Our next question comes from the line of Brendan Barnicle from Pacific Crest Securities.

Thanks so much for taking my question. You guys have obviously talked a lot about the Vault success in the quarter. I wanted to just kind of circle back to the CRM piece. And thinking about that, as you look at the add-on products that are coming out, how you feel around that prior guidance and commentary you've given around the 20% growth there?

So what we said in the script is we expect 15% subscription growth in CRM for this fiscal year and that will be a mix of new customer adds with new core SFA seats and add-ons. And as we have said before, I think it's still the case. In this coming fiscal year more of the CRM growth will come from additional core SFA seats and by the end of the year I think Events and Align will start to become more significant. I don't know if next year that will become the majority of CRM add-ons will be the majority in fiscal '18, don't know yet. But definitely in fiscal '17 we'll see the majority of incremental CRM revenue coming from additional seat adds.

Great. Thanks for that clarity. And then Tim, just a couple of follow-up on the model. The 35% tax rate that you were talking about, is that something you think will be your tax rate going forward that we should think about as we model future years?

Yes. I think Brendan that's probably the best number that I would go with for future year modeling of tax as well. You heard us talk about the two things that impacted Q4 and while we did have on the tax benefit from the Zinc acquisition a little bit of a one-time benefit in Q4, we're confident that those two things will continue into this year and into next. The other thing to note is which hasn't happened in the last few years is the R&D tax credit now has been approved perpetually. We haven't have to wait until the end of the year to figure out whether or not that was going to be approved. So that's also built into that guidance.

Great. And then on CapEx, should we be assuming similar investment this year as to what we saw in 2016?

No, materially different. In '16 you saw a lot of new H -- I was going to say HQ -- the new headquarters investments which is not going to be in our FY '17 CapEx. So it probably gets back to normal rates which prior to the headquarters investment was around $1 million a quarter, somewhere in the neighborhood of $1 million to $1.5 million a quarter, I would say.

Your next question comes from the line of Steven Wardell from Leerink Partners.

Hey guys this is Matt Dellelo in for Steve Wardell. Just a couple follow-up questions on things that have been asked. On margins, can you give a little more discussion around the investment that's bringing op margins down in Q1, and this year, what types of headcount are you building up?

Yes. So the investments that we are talking about Matt are in the products area and in a field area as we look at both increasing our development in new products and our existing products as well as scaling to the $1 billion in revenue that we talked about in terms of our 2020 operating -- or our 2020 revenue goal. Those are really the areas that the investment is in focused on both here in Q1 and as we think about throughout the year.

Okay. Great. And then more big picture, you spoke earlier about macro not being a concern. In your conversations with pharma customers, a lot of people are wondering if they're starting to become more cautious, given potential for increased regulation or pricing regulation. Have you come across that at all or is it still strong demand, same as last year?

Yes. I mean we really haven't seen a change from that. I don't think that broader macro things in the economy affect our customers day to day. We just finished an annual budgeting cycle, it's throughout the same. I mean I think the industry is trying to become more efficient, clearly there is pressures on the industry but there is also all kinds of opportunities. So it feels the same in the way that their budgeting and the demand for our products and for others that still feels strong.

Okay. Great. Thank you.

There are no additional questions at this time. I'll turn the call back over to Mr. Gassner for closing remarks.

Thanks everyone for your time today. We are pleased with our outstanding results for the quarter and for the year and would again like to thank our customers, our partners and our employees for that great year. We look forward to seeing many of you in San Francisco tomorrow at the Pacific Crest and Morgan Stanley Conferences. Thanks, everyone.

This concludes today's conference call. You may now disconnect.