Good afternoon. My name is Julianne and I will be your conference operator today. At this time, I would like to welcome everyone to the Veeva Systems second quarter 2018 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, Director of Investor Relations, you may begin your conference.

Good afternoon and welcome to Veeva's fiscal 2018 second quarter earnings call for the quarter ended July 31, 2017. 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 veeva.com under the Investors section and on the SEC's website at sec.gov. Forward-looking statements made during the call are being made as of today, August 24, 2017. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but we 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 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 and thanks to everyone for joining us today. I am pleased to report that we once again delivered a great quarter with revenue and profit above our guidance. Total revenue was $167 million, up 27% year-over-year. Subscription revenue grew 28% and we posted a non-GAAP operating margin of 31%. Q2 was a great quarter in commercial cloud and Vault. Within Vault, we had especially strong momentum in clinical. Let me provide more detail on each of our major growth areas starting with commercial cloud. We had a strong performance in commercial cloud driven by continued CRM expansions in core CRM and the success of our other commercial cloud products. We generated significant CRM bookings in the quarter including two top 20 pharmas who purchased for deployments in the U.S. and another top 20 pharma who purchased for deployment in Japan. All three included core CRM, CLM and approved email, consistent with the trend of customers adopting more pieces of commercial cloud both upfront and over time. Veeva CRM is a well-oiled machine. It just keeps getting better and better and it provides the foundation from which customers build out their commercial operations on Veeva. I am also very pleased with our progress in the newer areas of commercial cloud, including our add-on products. We now have more than 35 customers with either align, events management or both. New customer pipeline is building and existing customers are expanding deployments to new countries and regions. I am confident we are positioned for long-term leadership with both events and align. In OpenData we expanded our relationship with a top 10 Pharma in China. We also added new customers in the U.S. and Europe. We continue to grow our OpenData offering with the addition of two new countries in the quarter.…

Thanks Peter. Q2 was another quarter of consistent solid execution. Total revenue was almost $167 million, up from nearly $131 million one year ago, a 27% increase. The biggest contributor to our year-over-year growth was Vault, which represented 38% of total revenue in Q2, an increase of 800 basis points from a year ago. Subscription revenue was up 28% to $134 million from $105 million last year. As we discussed in the past, we believe that subscription revenue is the best topline metric to gauge our performance of our business. Services revenue was over $32 million, up 23% from $26 million one year ago and up from almost $31 million Q1. For Q3, we expect services revenue to be roughly flat as compared Q2 and to decline sequentially in Q4 due to fewer billable days. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses and operating results are on a non-GAAP basis and are reconciled to our GAAP results in the earnings press release that was posted just before the call. In Q2, our subscription gross margin was just over 81%, an increase of almost 200 basis points from a year ago. This was driven primarily by the faster growth of our Vault products and our non-SFA commercial cloud offerings, which have a higher gross margin profile relative to our SFA products. In the back half of the year, we expect our subscription gross margin to be relatively flat with Q2 as we will incur some duplicate infrastructure costs associated with our migration to AWS. Services gross margin for the quarter was over 33% which is relatively flat from a year ago. Given the growing demand environment for our R&D services, we are aggressively hiring to meet our customers' need…

[Operator Instructions]. Your first question comes from the line of Bhavan Suri from William Blair. Your line is open.

Hi guys. Thanks for taking my question and congrats. Nice job there in billings and certainly the business there. I guess I just wanted to touch first on clinical. Peter, you brought it up. You have been gaining really strong momentum with CTMS. The intra-quarter announcement of customers added there. I guess, how much is a fact where the buyer of CTMS is the same as the buyer of eTMF? And sort of is CTMS doing well on its own outside of selling into the eTMF? Just some color on how those two are interacting and growing to having a strong eTMF base?

Bhavan, this is Peter. It's a very related buyer and especially when it's in quite a small company, you may say it's almost exactly the same buyer. As it gets to be a big company, maybe it's a bit of a different buyer. But it's a very related buyer. So that's certainly going to help us a lot with CTMS as we go forward. And probably what will help us more is that the eTMF product and the CTMS product are all built on the common Vault platform. So when we show that to the CTMS buyer, it's something they have never seen before that it's wow, this is an integrated system rather than two disparate systems. So I think product line is probably helping us the most but it certainly helps that it's a very closely related buyer to eTMF.

Got it. And then one follow-up for me. You look at OpenData KOL and the CRM data, it sounds like you have the best CRM data in the landscape there in the world. And now you look at some of the EDC customers, I guess I would love to get sort of your, not today, but three to five years our, do you think like AI and machine learning and the data you have got, the applicable use cases there to make this a bigger moat for you guys. Just some thoughts on how you are thinking about that? Thanks guys.

Yes. There is different types of data. CRM and the CRM activity data, that's something we know very well and we have a lot of CRM customers. EDC, we are of course just getting into. Any time you collect a large corpus of data, you can utilize that going forward to make new data on. I think it will be particularly most relevant actually in the commercial area. I think we can utilize that going forward. It's not something that we are doing today but we certainly have plans to do that.

All right. Thanks guys.

Your next question comes from the line of Richard Davis from Canaccord. Your line is open.

Hi. Thanks very much. Well, anyone who has been around a lot knows after hours are not a place for reflective fundamental analysis. I mean, so one of the things I saw, we did our free channel checks, everything sounded good and then your commentary today, I mean I guess the question that I got sent in down from a couple of investors and you have a lot of shots on goal. So given that, just maybe reiterate to some degree, you don't have to go through the whole thing again but is there any reason why you should not be able to grow this business at least 20% for the next several years? I mean I guess if that happens, would you just move margins up even higher or something? Or how do you kind of think of those puts and takes? Thanks.

Richard. So we are really not giving guidance beyond this year. Of course we are still ahead of our targets for our 2020 $1 billion revenue run rate. Then we have our long term targets of building a multibillion-dollar company. That hasn't changed. And I like that word you used about shots on goal. We usually say the term planting seeds for growth. And that's what we done. I am really proud of what we have done here over the last year. So you look at this clinical area, this is a huge area. We just got our first two customers, but it's hard to get your first two customers. You really have to have a product that's compelling and we do. So now there is a ton of customers to sell it to. CTMS, very large market. We just have seven customers. I don't know exactly the number of potential customers in CTMS, but it's probably in the area of 700, not seven. And then we actually have new applications we could build on Vault too and then we have the whole outside of life sciences. So yes, I am confident. Although we are not going to give guidance on specific growth rates beyond this year. I am confident, we are on a path to grow this company into a multibillion-dollar company in the Veeva way, which means good profit margin also as we are growing.

So I will take that as a nuanced probably. How about that?

Everybody is welcome to take it how they would. But yes, we have lots of shots on goal. I am going to start using your word and that's important, right. If you have an innovation engine that's something we have been really working on over the last five, six, seven years as a company. To build a big company you need lots of shots on goal. So I feel we are in good shape. We just have got to execute.

Got it. Cool. I will let the next person on. Thank you.

Your next question comes from the line of Brent Bracelin from KeyBanc Capital Markets. Your line is open.

Thank you. A handful of questions here for Peter. I wanted to start with the commercial cloud side. I think you talked about three new deals with top 20 pharma customers. I assume those are expansion deals? Or were there some new customer wins that you are referencing here? And then could you more probably just frame the opportunity in commercial cloud, given that's one of your most matured product, how much more room is there to the expand your footprint?

Okay. Probably Matt and I will take this together. In terms of the three deals, those are expansions of existing customers that we had existing relationship. So they are expanding into new divisions, in some cases in countries. In terms of the opportunity ahead in commercial cloud, Matt, do you want to take that one?

Sure. Yes, so I can start with the topline penetration of base CRM, so a bit over two-thirds now, as we expected. If you go through the add-on products, CLM is up near 80% still and as Peter mentioned in his prepared remarks, approved email is becoming more and more of a normal thing where about 40% of our CRM customers have that now. And then the newer ones, events and align and engage, are all below 10% penetration. So that's a focus of ours. We have success there. We know the products work and we see a path to long-term success there and becoming the market leader in each of those areas. And then network and OpenData, while the competitive environment has been tough there, you can argue whether it has been fair or unfair, we continue to add customers and there is still a big market there. And it's still an important adjacency to the CRM business and we think that together, our CRM business with CRM add-ons with OpenData and network is better than taking, somebody would say that it's better than the sum of the parts. The whole is better than the sum of the parts. So still plenty room to go with these add-on products with network and OpenData and we are committed to being the leader in each of these markets over the long-term.

Very helpful color. Second question for Peter here. I know you mentioned some anticompetitive behavior by one of your competitors, I think IMS. Can you just walk through what part of the business do you think is most at risk or slower to be adopted? Is it just OpenData and network that some of the anticompetitive actions out there are challenging the business? Or is it broader part of the portfolio we should be nervous about relative to competition?

Yes. It's a good question. This is very specific. The anticompetitive behavior by IMS is specific to network and OpenData. It doesn't relate to Vault. It doesn't relate to CRM. So it's very contained there and we have a plan to work through that, which involves you know, in the courts, the antitrust lawsuit, which will take its time and then focusing on customer success with our existing network and OpenData customers, really refining the product and making it easier for customers to switch to OpenData, because that's the key. If the customers don't use the IMS data, then we don't have a problem.

Got it. Very clear there. And then last question for you here. You talked about creating a dedicated sales team to go after the CROs. You have 40 today. Maybe just walk us through that the CRO opportunity? What's your general penetration today in CROs? And what's the opportunity that encourage you to go out and create a dedicated team to go after it?

Sure. Yes. This is Matt. And it's a It good question because the CROs are important, especially as we continue to have a broader suite of clinical products. So the 40 number doesn't represent the penetration within those companies. So I would say while 40 is a good number, given where we are and it's a good time to increase our investment there with a dedicated sales team, within those 40, for many of them we are just scratching the surface. And the CRO market has been really dynamic. Not only are they buying each other, they are starting to buy companies that would help them get into commercial. And so it's a really good time for us to partner deeply with those companies and maybe even beyond more than just clinical with some of them. So I think it's very early in terms of penetration in CROs. There are, I think, a couple of hundred CROs that we could sell to. But the penetration within the large ones is still very small.

Got it. Very helpful. And then Tim, for you. As we just think about the profile of this business, you certainly have a pretty impressive op margins now I think for four consecutive quarters of north of 30% operating margins and average subscription growth rate north of 30%. As we think about the level of investments, the scope of the opportunity, obviously there is going to be some additional legal fees, how should we start to think about what that appropriate op margin profile should be in order for you to sustain multiple shots on goal, if you will?

Yes. I think if you think about two time periods, Brent, if you think about the back half of the year, you heard in my guidance, we will see a little bit of margin compression in Q3 and Q4. Now the Q4 one, I would hang primarily on seasonal expenses that you have seen in the past here at Veeva. So in the back half of the year, it's probably a little bit less than what we did in Q2, but that's still drive to a full year of about 30% operating margin which, to your point, we look at as a great performance. The other data set is the model that we set out for the 2020 timeframe and I look at that model and I think that is an appropriate model to think about in terms of our ability to continue to invest in new initiatives like we are today but even for future seeds and shots on goal, as Peter and Richard talked about, Brent. So those are two number sets that I would think about.

Okay. Thank you.

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

Hi guys. Thank you so much for taking my question. So going back to the EDC, it's really great to hear you sign your first two customers. Maybe just walk us through you know how you pick up these customers in EDC? I would presume that a customer who has maybe tens or maybe even possibly hundreds of trials going on, they are not going to stop a trial to put on a new EDC system. So is it just a matter of as trials startup, that becomes an opportunity for you to come in with an EDC product? And then I have follow-up.

Yes. So that you are exactly right. When a customer starts a trial with a particular EDC system, they are going to continue with that. They are not going to change. So our opportunities come when they have new trials. And it's important to know that the set of customers that we can sell to with our EDC product is probably the most broad set of customers we have had so far. It can be very small CROs all the way up top 20 pharma companies. So we get multiple bites at the apple because there is always trials starting. Then if you look at, for example, these first two customers, both of which are small customers, EDC customers one in CRO and one a sponsor in ophthalmology, what really enthused them is being part of the next generation and particularly actually in the oncology trial, which is a Phase 2 trial, it is a very complex trial involving multiple drugs and multiple pathways that that trial could go. And they were really enthused about the flexibility in Vault. So that's how you grow the business. You start working with your early customers, you start noticing and you start evolving the product in your message. And if you look over the last 10 years, that's how Veeva has built the business. Get the customers to listen, work incredibly quickly with them, evolve the product. So that's why I am so excited about EDC because it is just perfect for us. We get multiple chances to get customers learn from them and just grow from there. And if we can evolve our product faster than the market is used to seeing products evolve, we will do very well. And that's just EDC on its own, but when we have a whole suite of products, it helps us, meaning in the clinical area also in the regulatory and the quality area. It really amplifies the effect of EDC because we get higher up into the accounts and we could be more strategic and we can get our messages across well.

Got it. Thank you. And then maybe one from Matt. Around the sales force, how has the productivity of the sales force trended? And maybe just some qualitative commentary on the sales cycles? Have you seen anything relatively unchanged or is there some changes that you want to highlight? Thank you.

Yes. So as we talk about these lots of shots on goal, another shout out to Richard, as if none of us ever heard that before, Richard, but it's a good one. We have products in different stages of their maturity and so it's hard and we don't really even try to put like a single sales productivity number out there. There is a brand new CRO sales team. That's going to have a different number. There is a brand new sales team going outside of life sciences. There is people that are working on CTMS and EDC deals where we can really only sell to a specific number of companies because we are only trying to get early adopters right now. We are not trying to get as many as possible. And then we have more mature products commanding market share. So it's hard to just kind of put a number on sales productivity. Now in terms of sales cycles, I do think that they are getting shorter. We see more and more shorter sales cycles for add-on products and shorter sales cycles for new customers where the people came from existing customers. And so to be specific, a company launching their first drug and they are standing up the sales force, it would almost be impossible for that company to not have people that have used Veeva before and very often we win those deals without an RFP now. And the same thing for an existing Vault customer who is looking to expand in other area because of the success of Vault in the first area, we can win an additional area without an RFP. And if you eliminate the RFP, you can really dramatically speed the sales cycle. And I think we feel that around the world. Now it doesn't mean we don't have competition. Our competitors are out there all the time. But I definitely think there is a large number of faster sales cycles today than there was just a couple years ago.

Perfect. Thank you. And last one. On FX, did you guys see any FX headwind or tailwind in the quarter? I think I will get the whole management team involved. Thank you.

Yes. Stan, this is Tim. It was a little bit of a tailwind, but not material.

Okay. Perfect. Thank you so much.

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

Hi gentlemen. Thanks for taking my question. So Peter, a quarter ago you talked about first pretty meaningful win in QualityOne outside of life sciences with your top five CPG. This quarter now you are talking about an expansion with that same customer. Would love it if you could go into a little bit more detail about what that expansion was? How it came to be? And then more broadly, what are you doing in that product set to staff up the customer success teams to drive different used cases across large organizations? And what are those existing customer success stories doing to drive a lead gen in other verticals. Thanks.

Okay. So Tom, we are very quite early outside of life sciences. So we have a relatively small set of early adopter customers. But as you mentioned, some of them are big. You mentioned the top five CPG. But actually, I guess it was in Q4, we talked about the two large chemical companies, top 30 chemical companies that are doing their initial projects on Vault as well. And one of them is actually a top five chemical company. So we are in there with these very large companies and it's always an initial project. It's initial projects. In the terms of the CPG company, it was initial, it was actually a platform project around managing a part of their product development process in the CPG area. Then word started spreading that hey, basically that Veeva product is good and the Veeva people are good. So that started spreading around. That caught the attention of their quality group, quality management group. And so now we have initial project going on, pilot project in a few of their manufacturing areas. Now that could expand, if it goes well, we hope that could expand to be their major quality system for all of their manufacturing area. So that's definitely going to be a large deal, multiple seven figures type of deal. So that's really what's going on. Now if you get into why. Why is it? What's really attracting them? The quality of the software platform, the people, but specifically in the QualityOne, two things. Externalization to involve your suppliers in your quality processes and the idea that you can have your quality work processes, your quality management system as well as your quality documentation system, all in one system. They have never seen that before. They have had fragmented systems and in a lot of cases, faxes and paper with the suppliers So I could run down the list. I know one that the team just talked to this week was a industrial products manufacturer, a medium-sized billion-dollar industrial products manufacturer, European company. We are selling into their U.S. division. They have a lot of suppliers to collaborate with around the quality of their product. They can't do it today. It's email, faxes, papers and multiple systems. And when they saw QualityOne, wow, that looks good. Now okay, that's a billion-dollar company. It takes some time then to purchase things and grow the business. But I hope that gives you a flavor of what's going on outside of life sciences.

Yes. That's excellent. Thank you. A quick follow-up here just in terms of some longer-term targets that you guys seem well on your way to here. Your 2020 $1 billion target, you have noted repeatedly here that Vault's well ahead of plan. Can you just talk a little bit more about what some of these headwinds within OpenData and network relative to some of the anticompetitive positioning going on out there? Does that change the shape of how we ought to think about the composition of the business in 2020? And any updated thoughts you can share with us relative to commercial versus Vault in that longer term outlook? Thanks.

Yes. Hi Tom. This is Tim. As you remember, when we set the 2020 goal a couple of years ago and we talked about it again last year, the commercial cloud business was roughly targeted to be a $600 million business in that timeframe, so in 2020. Given the performance this year and specifically the subscription revenue growth rate that we have reiterated in my prepared remarks, we are still on track to size of business of that $600 million in the 2020 timeframe. What I would also say and you just talked a little bit about the shape of the $1 billion, as we are ahead of that, I think when we get there, given that Vault is driving primarily the amount ahead, I think the mix maybe a little bit different than the 60/40 we originally talked about two years ago.

Got it. That's helpful. We will keep checking in on that. Thank you.

Your next question comes from the line of Jesse Hulsing from Goldman Sachs. Your line is open.

Yes. Thank you. It sounds like CTMS and EDC are off to a pretty good start. I am from wondering, how are early deal sizes trending versus quality at the same stage? And I guess when you look longer term as these product lines mature, what do you think the opportunity is for CTMS and EDC in a given customer versus quality?

Yes. Thanks Jesse. So I think if you look at like the early QMS deals versus the early CTMS, they are pretty similar. It would be very unusual for us to have seven figure deals in the first couple of quarters of having a product out in the market and we don't. And so they are generally smaller companies or they are smaller projects within larger companies. But I think they are similarly sized. EDC is actually probably right in that range, although we have a smaller number of examples so far. And EDC is the one of those three that's actually quite a bit bigger, not only because there is so many companies that we can sell it to. But it's sold by the number of sites within a trial. And for a large trial, it's a large purchase for a company and it's so critically important to running those trials properly. So we have talked about EDC as a $1 billion market. We think that's easily supported and we have seen that even in the field so far. The companies are expecting to spend a lot on that. They have been spending a lot on that for many years. And so that's bigger than CTMS and QMS, but those are significant for sizable pharma companies, med-device companies, those are seven-figure deals and sometimes multiple seven-figure. So we think each of those as big markets but we do think of EDC as the largest of all of them.

Yes. And in those CTMS and EDC wins this last quarter, were those competitive versus Medidata, I suppose or anyone else? Or were those kind of sole-source situations that you were able to close?

Yes. So I think they probably without exception they were competitive. I don't know that we compete against Medidata in every single one. I do know that we competed against them in the EDC ones and not just Medidata, but if we look at the two EDC early adopters, the people at those companies and those companies had experience with all the major players in their past. And I think that was a big reason why they were looking for something different. In CTMS, I know a couple of them were directly competitive. And again, those people have experience with the legacy systems that have been on the market for a long time. So we got really encouraged because the feedback is, it's like, wow, there is finally some innovation here. This product is beautiful. These things are integrated on a single platform and that excitement that we get from customers and prospects is infectious. It probably started with us. But then we show the product and we get it back.

Yes. And I could just add a little there. The interesting colors of the CTMS customers, I think all of them were eTMF customers, because we have a lot of eTMF customers. And if you have our eTMF and then you see the combined CTMS and eTMF together, there is basically no way you are going with another CTMS. It's just illogical, right. A unified system is so much better. Now on the EDC, it is interesting. Those two customers had no other Veeva products. EDC was the very first product that they bought. Now why is that? These are smaller customers and the EDC just happened to be their highest priority. Now they knew about the other Veeva products and they are thinking about those. But EDC happened to be their first purchase with us. So I think EDC is going to stand on its own of its merits and things like that, better EDC. And I think CTMS has a unfair advantage because it's so much better to have a good eTMF and a CTMS together that it's the only offering like that in the market.

That's very helpful guys. Thank you.

Your next question comes from the line of Ken Wong from Citigroup. Your line is open.

Hi Tim. Firstly, I guess I wanted to touch a little bit on your commentary around just staffing up on the services side. Should we expect that with the growth in capacity there that the growth rate of services should start to pickup in back half and next year? Well, I guess not back half, you already commented on that, but in the next year?

Yes. So what I would think about there, Ken, as we think about services and we have talked about in the past, it is a very lumpy business, whether that's when projects come in, what the duration of those projects are, sometimes we will see some fixed milestone types of project. So from a quarter-to-quarter basis, I think it's hard to figure out the pattern in our services revenue line. What I would say though is, we are staffing up today because we do see that demand from an R&D perspective. So we are staffing up for some growth, although I am not giving specific guidance for next year. And again staffing up for customer success. So that's the way I think about the services staffing that we talked about in my prepared remarks, Ken.

Got it. And then on QualityOne, you guys have talked about growing that sales force more aggressively. Any update on where that stands? And in terms of customer growth there, you guys talked about expanding within the consumer packaged goods company. Any new customers to call out?

Yes. We did add some new customers in the quarter, but we are not going to breakout the specific numbers. I think what we are most enthused about is just the conversations that are starting, the word that's getting out. I mentioned that industrial goods company. There is another large multibillion-dollar industrial controls company we are talking to, multibillion-dollar health services companies we are talking to. So the discussions are starting. It's really not about the number of customers at this time, it's about the types of divisions we are expanding to and the types of discussions we are having.

Got it. Great. Thanks a lot guys.

Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Hi guys. Thanks for taking the question. So I wanted to hit on the eTMFs that you gave in the press release, just with the 31% customer growth and then the 66% growth in subscription revenue. I am curious how much of that uplift in the subscription revenue is coming from the clinical side versus those customers potentially looking at other Vault products?

Yes. So that's specifically is just Vault eTMF. And so that's only the clinical document management application.

Okay. Great. That's a good stat. And maybe one quick follow-up for Tim. I am not letting you go without asking a services question. But as we think about more of this suite deals that you are implementing, how should we think about the dollar-for-dollar intensity of services revenue versus subscription over time? Thanks guys.

Brian, it's a good question. So I do think when we think about the business overall, we think about the business, the industry cloud model as being both, the best products on the best modern cloud technology platform as well as the best people that have pattern recognition and are sort of pollinators of best practice across the industry. So I think our customers look at both of those when they look to Veeva to partner with. So I think over time, you will still see over the long run, you will still see a service revenue contribution, as being fairly material. Today, it's sort of in that very high teens. I think over time that will come down as our subscription revenue base continues to grow. But I still think it is a material contribution given the industry cloud model and the desire of our customers really to work with our people and really optimize their experience with the product.

And it's going to depend product to product. I would say there is generally always, not all the time but the far majority of times, there are services attachment when we would sell a new product or an existing product into a new division. And the percentage of services as it relates to subscription is going to depend from product to product to product. So for example, I would expect the CTMS services attachment rate to be higher than the eTMF attachment rate because eTMF is kind of a hub and has to deal with a lot of integration. So it's just going to depend from product to product.

Got it. Thanks guys.

Your next question comes from the line of Scott Berg from Needham. Your line is open.

Hi everyone. Congrats on a great quarter. Most of my questions have already been asked. But the one I wanted to follow-up on was, within your EDC pipeline, commentary seems pretty strong in terms of pipeline building. I guess I was surprised in the quarter that one of your first two customers signed was a CRO versus a direct deal with a life sciences customer. But how should we think about that pipeline composition moving forward? Is it more heavily weighted towards these outsourced organizations? Or do we think it should expect to be more weighted towards direct life sciences customers? Thank you.

I think that's going to change a bit over time. I think it's both. I think it's a little, possibly a little heavily weighted towards the CROs right now in the early days, because the fact is when you are just getting going in the early adopter phase, you are more likely to have a smaller company, a very nimble company evaluate you very quickly and then go forward. There are more small CROs than there are small pharma companies. And in fact, many small companies will outsource that type of thing completely to a CRO. Now as we get more mature and get more discussions with the large pharma, that's going to weight back to the sponsors, because still the largest EDC opportunities are in the top 20 pharma, even though there are large CRO organizations you have more opportunities in these top 20 pharma.

Great. That's helpful. Thanks for taking my questions.

Your next question comes from Kirk Materne from Evercore ISI. Your line is open.

Hi. This is actually Tom Mao, calling for Kirk. So as you move outside of life sciences, do your partners become more important in your go-to-market strategy? And what are you doing on that front to improve your partner relationships?

I would say, as it relates to the partners outside of life sciences versus and inside of life sciences, I think it's actually similar importance. Partners are important inside life sciences and outside of life sciences. I think we will have actually similar services attachment rates. Especially in the early days with QualityOne, we really want to be very close with our customers. So if we look a year ago, I think we wouldn't have had quite that clarity. That's one of the learnings that we have had now that is actually going to be a very similar partner landscape outside of life sciences versus inside of life sciences. Of course with probably different partners, right, because we are going after different industries.

I would say there is one thing that's different though. And that is that when we first started in life sciences, we didn't have any partners, right. No one had ever heard of us. The products were brand new and we had to earn a lot of customers before large systems integrators wanted to work with us. It is different as we go outside of life sciences where there is a lot of interest from both large and small systems integrators to work with us. And that's one of things we are working through. But that does feel different. The kind of the partner demand is already there because they have seen our ability to grow within a market and to make customers successful.

Great. Thank you.

Your last question comes from Brad Sills from Bank of America Merrill Lynch. Your line is open.

Hi guys. Thanks for taking my question. Just one on outside of life sciences, you mentioned some new wins there. Just curious if you could comment on which sub-verticals there you are seeing tracking, either new wins or pipelines? You mentioned oil and gas, food and beverage. I know you have had CPG wins.. Just any commentary on where you might be seeing more traction? Thank you.

I think, well, certainly the CPG is a strong area and it continues to be. Chemicals and chemical related things are good. Also things that are adjacent to life sciences, highly regulated services. And I would say, especially in the last quarter or so, early indications of good interest in manufacturers, general complex multi divisional industrial manufacturers. And that's where this notion of the supplier, the extent of supplier integration and collaboration around quality, that's probably been the biggest learning in the last quarter, increased interest from these diverse industrial manufacturers.

Thanks Peter.

There are no further questions at this time. I will now turn the call over to Peter Gassner for his closing remarks.

Thank you. It was another great quarter for Veeva. Thanks as always to everyone at Veeva for your hard work and your dedication in making it happen. And thanks to our customers for your continued support and partnership. We appreciate you all joining us on the call today and look forward to seeing many of you at our upcoming Analyst Day in October. Thank you.

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