Model N (MODN) 10 Nov 192019 Q4 Earnings call transcript

Greetings and welcome to Model N Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host today, David Barter, Chief Financial Officer. sir. you, Thank

begin. You may

Chief Welcome N's fourth to on for afternoon. is Model earnings XXth, on with the call Executive the and fiscal Officer. N's today N's Barter, quarter David ended Blessing, This Model Officer year and XXXX. me Model Good Jason is call Financial Chief XXXX, September which

is is performance Our full to fiscal of our website, on and is earnings press posted regarding purpose information release you year quarter XXXX. financial primary was this provide issued for being call our after today's and and The our first fiscal call close and of market quarter outlook webcast. where year fourth our XXXX

current not include the results of most the today outlook. on any call materially. may Please disclaim views statements. statements subsequent be date. made SEC. We to expectations or factors obligation to management's this forward-looking forward-looking and as filed as as relied of may with views differ forward-looking Form representing our statements any XX-Q upon should risk These update Commentary and in are on Actual any refer recent based our

addition substitute financial GAAP In call, measures. not non-GAAP discuss considered we measures results. for a to, in should non-GAAP addition, These as or in be from financial will today's during isolation

of our release, today, replay the visit non-GAAP year XXXX is to available fiscal the of reports, included website. periodic this access Relations nearest issued encourage call. our to SEC and earnings investor.modeln.com metrics to you release which quarter Reconciliations in on the GAAP website press metrics webcast the fourth are I at our Investor

call all to financial be fiscal results Finally, unless year our will XXXX. stated, in in comparisons this otherwise

turn to With the call over that, let Jason. me

for report afternoon Thank revenue everyone. for to our quarter us and adjusted $X.X and with you, good million. was today. was well-executed EBITDA guidance. million quarter results I'm Total of the $XX.X pleased Thank another ahead joining David you

to conclusion an fiscal year XXXX. punctuate results outstanding QX Our

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company something QX celebrate by better. today most their everyone that families I be and end what want meeting, year-to-date proud and Like congratulated to our on they their satisfied, execution, and our to and team how making. said neighbors, company them CEOs, I'll striving to but I great our we're work are never Model to At I meeting. home our at encourage be be tell sharing I QX progress success, always at strong go N

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like call turn would over to our financial the I to on elaborate guidance. and David to Now, David? results

Jason. you, Thank

compelling a for the very quality company, to financial the fourth strategic early and Even profitable results. scaling team's and Our in execution positioning us the reflected our to N days is is of growth. results our I year be more and exceeded SaaS believe as starting the deliver XXXX exciting, Model growing the expectations. vertical in focus quarter of company's fiscal

full Now, fourth to from I'd fiscal year the XXXX. with share of and like highlights our some you quarter

of reminder, the a XXXX adoption our year As business our ASC our fiscal XXX were by and shift to results SaaS. model of impacted

revenue top fourth was and healthy for was the above outperformance revenue in revenue our subscription growth also $XX.X top million. guidance million of Professional and for the was the guidance $X.X too it Total which reflects range. end above the services strong was quarter, quarter the range. was The of our million quarter. end $XX.X Profitability

gross QX substantial margin Non-GAAP XX% XX% was for million improvement of margin gross gross a subscription profit or revenue XX%, fourth for professional year Non-GAAP the services quarter XXXX. XX%. revenue. fiscal of for in Non-GAAP the $XX.X was was over

top was of for income non-GAAP guidance operating which guidance. also of $X.XX generating our million. This the to quarter $X.XX, ahead of profit our aligns of Non-GAAP focus $X.X $X.XX. profitable per was period commitment We was share on with growth. million. It the produced income exceeded fourth net a end Non-GAAP in net and $X.X the our

$X.X invest This was of long-term levels guidance enhanced $X.X growth, Adjusted our EBITDA of strategy profitability. a million, fourth in $X.X million is well the to was our to of driving million. while for of which direct quarter ahead reflection

cash the XXXX fiscal overall continue we with the the of to $XX.X ended fourth balance in quarter flow million the cash and free to sheet, million $XX.X equivalents. cash of profile We strengthen year of and financial generated Turning company.

improve, flow to further our outstanding continues expect position. we increase our cash to cash free debt our and net reduce As

XXXX our $XXX.X Turning full fiscal results. $XXX.X year revenue million. to was revenue was and million Total subscription

of was an million XXXX. the fiscal year, for full million income year $X.X margin operations in Non-GAAP income year XX%. gross XXXX to operating to compared grew $XX.X non-GAAP fiscal For from

net million, year. the $X.XX for the Non-GAAP fiscal for Non-GAAP per XXXX prior million $X.X fiscal $X.XX, was income XXXX a share income year net $X.X from meaningful from was increase up year. in prior year in

a profit XXX points basis Adjusted XXXX to margin of $XX.X of $XX.X for compared grew Adjusted year in XX% X%. XXXX. was approximately fiscal million million or profit EBITDA fiscal year to almost EBITDA a by

Looking with healthy entering year ahead to the fiscal year XXXX, we're visibility.

new is our revenue to approximately XX%, old the worth reflects discussed on contracts team's subscription maintenance ongoing which growing consistent rate, also the our guidance we QX. again our and that line last subscription midpoint our saw of quality earnings to guidance our As from last continued single-digit reflects It's our decline of guidance call, in our continues shared the with the with on while noting shift top of once in end revenue at call a execution, we at SaaS. our what

of We're encouraged expansion the our gross also margin. by

We margin approximately a to for to a margin of XX% professional year, for approximately non-GAAP in expect coming our gross with the and XX% points subscription services. non-GAAP which of XX% margin two gross aligns increase

will environments. and customers will teams. with the also that to of onetime product sales make profitability some guidance round level note allow to out help some us XX our the enhanced migrating final which existing factors in our It's our of additions cloud targeted development important associated profitability organizations, older This costs to

expect fiscal to to from revenue we million $XXX year subscription range million revenue and $XXX total million, to full $XXX For to XXXX, $XXX from million. total range

$XX and income fully on million the XX.X share $X.XX the million income share a in million non-GAAP to expect operations in non-GAAP per We of count based shares. diluted $X.XX range range of $XX from approximately to of

the seasonally of the in to to lower reset, EBITDA our in year Please fiscal to $XX half new programs, marketing in the the $XX year. then adjusted expected and the first to mind conference of million fiscal increases that rollout be the of of payroll in profitability million. tends be user keep and half the due is tax EBITDA range our second Adjusted

from total expect we be $XX.X $XX total a this, to within quarter, $XX expect of approximately revenue growth $XX.X million to represents This first to subscription And the XX% we range million. to million revenue For at midpoint. the range in million.

share lead approximately to income This fully $X.XX million would of count shares. a to to income on of operations a diluted be the Non-GAAP XX.X from non-GAAP net is of in share range per $X.X based expected to $X.X million. million $X.XX

million, expected top midpoint million is to almost at over and XX% of to the which the $X.X end range the of growth Adjusted range. the $X.X represents be range XX% in of at growth EBITDA the

the us. is I'm excited working I fiscal front our opportunity illustrate believe XXXX results incredibly fourth year and our about in strategy well. of quarter that

Our prove on we strategic growth to and one life driving will are sciences well-positioned it. customers from tech focus to right existing high and and on new execute be the in

in We're days as early company. the vertical SaaS a very

line we strategy, and our to our continue our target I'm will growth, As deliver model with further execute in on we market confident expand profitable leadership.

joining Thank today's call. for you

to the turn call the for Now, over I'll operator questions.

a Instructions] Thank you. question-and-answer time, we session. conduct [Operator At this will

question. your Our first Oppenheimer. comes with with proceed from Koji question Ikeda Please

year. to new Chief Revenue and earlier here this a nice Officer hired congrats year. Chief A fiscal you hire, guys the Hey recent question Product the your the Officer finish your of on on on close

new on from or product now, Product there? roadmap high overall about how I at Chief sort should be of here? vision thought the thinking what's So, any changes why a level, the Officer, to process And we guess, the very

strategy anticipate would for force alignment yes, now the be next capacity? seat even the has got follow-up and force year, then in that been go-to-market at of Revenue for we I've about one should or there. sales And changes year your on Chief And of Any half you. sales to or fiscal the Officer, beginning Chris helpful any the so sort help or

talk Good Koji. you. question to to Good great. Okay,

take let So, individually. both of me those

with I'm the do I've my I'll -- that this the on Product new Officer. job, I to Since Since company, our strongest I going field. our Chief best First, start Kannan, our customers Suresh. to took team our Suresh have committed to investors and

started his IBM and career strong as we as background. a very to then as engineering know Oracle. his company. member is at He is technical got a really I to very I having to of I the instrumental going liked continue the senior got strong and operationally, And Suresh, also He's background, staff think be scale

couple A over at about a got liked he's working of the out stood his sciences that years unique other things different XX, various I XX is of little background life that companies. background,

data great And he about So, tremendous I IMS and his can had be amount And think data building an opportunity and brings domain well really as Quintiles, of I he experience at us. expertise. some that for a products, that in particular, offerings. like background

the final met enterprise nearly The I've is, thing about oriented most say that I of Suresh XX commercially would leaders my now he is one years in of product software.

So, he's active that. around strategy deals. a our of to field, next going close growth team to very couple comes And with be to think Lyon in also very he's He years. the going helping also additive be I in the orientation sales I the good think Chris over and

of commitment feel bench perspective. strength. like improve I'm to So, a position good been with my it's from has to I of as overall our And continue on executive changes, the making been from an these every case made one really

would sales In in slipped terms of say Chris, Chris seamlessly organization. our I to really running

XX talked and made I As we our almost and we to were deploying changes months day, structured team some the about, organizing in and how go-to-market are how resources. we

really very had started to I -- growth company. Chris and for inflect organize role, got to this better he the similar as we really And how on thinking about know him in views and

in I'd about as Chris transition say can seamless with so it be. as And that coming was

sales and foundation capacity to has And say, out which, on to XXXX well in continue upgrades making we He's all us really operations invest. a been really function, top our sales can thoughtfully world-class we leadership. selectively exit importantly, built to which some as Chris I enablement continue growth extent He's position I add to of in drive would set think function an beyond. built sales and to up but XXXX, even of the to more

Thank that. questions that for for thanks of Mr. and Any Jason the could SaaS you the are be revenue ending quarter maintenance mix helpful. provide exiting you. chance my would Barter. fourth And follow-up

happy color. a give be Certainly, I'd little to

XX% Over when -- new the the about SaaS of the year XX% obviously maintenance -- course the continued think just finished subscriptions we to for of XX% and legacy the where of we color, the then last maintenance. year, year, SaaS and between just SaaS -- XX%, the nudge we up mix to XX% legacy finished and and a And where we crossed between mix maintenance. versus we of XX% ended XX% this XX%. shy about the about we just at

and one for Thank quarter. great questions a my congrats it. Got taking

Koji. Thanks

comes question next from Jackson proceed question. Please JPMorgan. your Our with with Ader

evening the maintenance mix. question, first actually, subscription Good versus My on Thanks. follow-up guys. let's Great. just the

I first the subscription slides, and be So, supplemental said the say, new in here maintenance that fourth think -- XX% an in should implication I for should the quarter, was mid-single-digits. it there about revenue declining up

from So, look how new, or subscription if much just in And XX% that revenue, much is growth is at of revenue? on-premise we from logos transition? still just coming the either new how brand coming

Great around for do joining it question, just to Jackson today. us lot of The farming. last was had thanks growth and and a throughout hunting organization this with year

I so exciting. us elements that's of got think the that really one And

our within the given of so is daily it of going model the ratable idea the really preponderance expanding logos that customer and growth after reflects And new that base. relationships

in press is bulk as quarter. really related booking SaaS a how companies little there we've on we'll to grow. bookings the the SaaS the within been what but transition, a just give of to saw was more bit you As But most think color release, I happy what of

mean, logos honestly, year which some opportunities. majority and expanding within the to add on just impress color from investors vast of new point SaaS and throughout really expect can growth conversion biggest I we the those that If Jason. the that. is on because I trying this analysts this that coming been Jackson, is I've Yes, signing existing footprint you growth and our levers the would are dwarf customers, have, two to

in to averages, been have really expect nice the of seen a mix them throughout three is, contributing three full of focused all and of them see year. we you to it some honestly, would So, And that. respect, all on, bookings of

Great.

services Okay, the The I I to appreciate want color. made point that margin. you, gross the just David. additional you professional helpful. follow-up clarify one is that for on

that, we this I So profitability migrations. expect EBITDA going the expenses to if to of from on be adjusted or headwinds is And XX% one up year. think, tick to one-time-related

those So, show expenses services, are figured services that Because they what but -- in cost up are be and any up? help going to professional where of but goods, they would great. professional there would I show

great that's question. Yes, a

So, of kind I your question. just to maybe think on build

I the we think where one that to on about we've of XX older that in what we something the over I last working highlighted remarks, base customers this code had and AWS. of all on moving years mounted been had on couple is customers clouds that

developing an code on keeping current code obviously, and, And evergreen customers base. obviously, efficiently

there on you're new -- have customer costs some and costs the incurring recurring a them both old are in getting in can environment actually There in and And imagine, -- in cut over. parallel so professional you the to the almost services. some while are side running environment, as you cost just

that bit of and so we've will compress little ourselves work. little margins given to And room a a bit

success. covered of how kind as -- realize you us, you've are in you Obviously, we as customer focused

we making sure done tackle and we're get the we job really that well, this so And right.

that the are would cost. the of lines two the absorb bulk those So,

guys. All right. Thanks

Please is your proceed Bennett question from line with with Craig-Hallum. next Our Chad Chad, live. question. your comes

question on. Needham. move your next We'll with MacDonald with Please proceed The from Ryan is question.

process transition something -- device David. guess, on we Gilead? the frame the it Thanks should what terms for I announcement my with on questions. and time Is expect large of regarding just med company you that first took in Jason similar sort see taking we there, Hi to should and the of transition? that

maintenance customer are is the range? similar line I migrations, uplift sort sort to in of, you've to on past, I to what see times seeing to the three an trying these And as expecting the believe, or in additional what guess, Thanks. discussed you of you're two drive

learning on that is project done color. add Yes, I'll the Ryan, I'll these we efficient good multiple of comment then here the some them. say and at are now as we more and getting news have let David

we that months. the was XX time did Gilead, the Our to that in effort a very so large at was over we sure took little make and we first one successful and transition wanted that first to put make and

months. And been Both before are Novo of projects now very Biogen after live XX of go Biogen have year Novo. of in calendar first the the the year, that and end the neighborhood projects will two we've in got those here large flight, holidays. the the to of in XX

that one talked that the about to a month or towards And ilk or Gilead XX is size terms complexity, around be today year. two, then going call months, a Novo of in and plus on and one's the minus but we more closer to and the somewhere

efficiencies in -- more under are we're driving and pretty significant we these belt. our as we get more projects So,

And yes, go I'm -- guess Excellent. I ahead. sorry. David,

of and be so and appropriate. that structure ones in deal just ends see on fits other to framework and the Well continue this of question that multiplier to we the the particular mold economics, and book the your terms

that segment, that digital more on, given annual are do needs particularly And beyond as the to discussion of two conversations budgets versus sciences or Jason, discussion quite the customers and view moving on out of particularly around in often. transformations guess, more I to guess, look as the of life you're Excellent. there at a a the then that two just three-year meeting budget transformation? to discussing follow-up. I you One, cycles, an that. meet of of questions you talking are sort going terms sort

needs? the you new from sort we they're are in pipeline? Product for Thanks. should those on And coming perhaps of there secondly, with the customers in product, product Officer then Chief that meet to asking hearing some And investments expect what additional

Yes.

now your terms with top affairs in gone question customer strategies. very really budget, So, worked function to behind align roadmaps have success our XX investment their state build our answer simple corporate and through absolutely. We to XX, multi-year of that and is for them the customers the really with of closely

the this companies XX think I the in to I household over names to you XX ones next much sciences going the industry strategy. broader And years life that thinking that horizons will corporate to and continue in tell with time dominate are are are their be

the answer is yes. simple So, to that

transformation, that regulatory are think what And the addition obviously, and I the categories M&A really to continued geographies are in environment other they in two and they slowed want digital and trends there. And has get and to the changes driving rate not about to new now thoughtful want what of investment thinking companies pace then, into. down markets dominate

is very to think, robust. end simple the answer the to I be that markets, So continue

they terms some map our continue key different a three areas. perspective, themes road with into partner to of In fall what we're customers from driving of us really that on and the

look decision-making, The is on analytics better comes sign and forms. what around in for profitable business. the kind so this of is us to deal more first we ideal just just One history, based does our drive like can better two

neatly package that's particular, channels can And of that you revenue the for into up leakage. very getting is But analytics. in important just companies one visibility better sell-through that all better things into then, complex

the markets, Europe majority around area both lot being that in the are continue as are and well experiments customers very of together we which of where with changing second landscape, and piloted a pharmaceutical to regulatory sales. The as new invest changes the are work global U.S. closely

make to and a provider. then that the last as easier in products just to for investing And easier administer us and been area we've use our cloud to implement is

the come in is the enabling really really product, what's in testing so form of better better instrumentation see this. instrumentation particular, tools. area, and SaaS This in And tooling And transitions. that's tools, you better

like, seen. now, do that incremental I tuck-in we of it got suspect some right new gross will but be edges, the may there to the aboard, in appropriately And margin investment opportunistically we've our And you've skill product look coming sets. with Suresh and resourced feel around some improvements organization, some

a Excellent. Thanks Congratulations. lot.

Thanks Ryan.

Raymond comes Our Peterson your James. with with Brian from proceed next question. question Please

look on of surrounding Kevin for they to I Can point, cloud. wanted I mentioned Thanks that investments and move last to for the to on Brian. the here templates, follow-up you to ask toolkits the now guys. efforts to of about my us Hi, some support and you guess, your taking SI customers of you you've call. remind more you little where made recent now partner that, are about And maybe talk seasoned some little those more that that related work? bit you some contributing to following with then a network? they're a see how can and the conversion as

Yes.

great series Okay, question -- questions. great a or of

very delivery involved SaaS some year. last the specifically we've things, in So, projects have side of on of in and our been the all, partners done partner of the as first in been of have the of important transitions driving bookings well that our some as

to opportunity so be And strategic me to for a continues us. that

continue to half probably to more the We in company the capitalize near be to function. first actually that hired at of fiscal a middle the of build in executive new momentum -- and year factually well, the correct,

do of I opportunity area regulatory new to us. changes that for -- going is of between work some of about. think just there be SaaS I -- continues an So, to that logos with And talked the that out lot be and there's transitions, a

of renewed great on well it, particularly the of capitalize deal some and I to internally. there's So, think focus with positioned a we're interest,

of a to you toolkits, of you give start can specific also that used we've I'll triangulate terms that examples In results. couple in our

that SaaS have product. started configuring come of more implementations, to with implementing and do our approaches First standard more as all, we to

to larger That's implementation express an the enabling have year. honestly, role global we sciences so And of in an customer, the growth this that's important all way in divisions methodology some of up a to applicable mid-market now life played some multinationals.

one me, and as services -- to of like SaaS excuse revenue professional that a two has dollar. And rightsized services company, selling times times half do our dollars been as to SaaS see more recurring a are like the kind you and the business more we started more

implementations. So, direct put the emphasis more we've on that's efficient of benefit a

The of is we've or second built tool suite tools around testing.

largest sciences life to own needs changing get of by particular, in One handles system the regulatory that a internal their objections it their audit. to customer, any revalidated having is to

of that put that automated vanilla And audit. manage quickly from works amount more test test suite signed and our a customers internal shrinks so dramatically into cycles, get we've product effort risk, building an with off helps tremendous

That's guys. very Thanks helpful.

Thank you.

your question. JMP Our Walravens, Securities. next from Pat question Please proceed with comes

Thanks Awesome. very and guys. much nice job you

so, give me, missed if it, the ARR but growth? I and SaaS So, have did Dave, forgive might you

I did published the that not this I among did metrics that not. include time. we

want you it? Do to Okay. give

Well, so reaction of really pat with kind is metric that acquainted and the RPO. been around people a getting using we've just

I'd then I we've I think, RPO, we've out getting comfortable metrics, think and as the And so with in the life been break that. people sciences phasing want obviously, And just that been say high tech. we to

quarter, you'll we I you'll So, of see see a what in up for million, the that the bookings was, about path think is which K, the bit think, so RPO real $XXX little the finished a reflection I over XX%. and

question. second my anticipated just You

Okay.

little So, over $XXX million? RPO a was

I Yes. I comfortable it's I fine. since of that XXX, a Right, a people current the while part getting that's good that's just current we've Well, guys metric you correct. mean, that's portion because indicator. and quarter? it's double-click the into been know it's In -- -- using think no,

XX%. over climbed $XX portion current million, about the So, up to just

color this David of top what a I'll is Good couple said. afternoon. on of Jason. Pat, of bits And add

revenue than growing is, and the and implied to at results XX%, healthier that. So, bookings a the clip at continue slightly grow in are guidance recurring

much was $XXX Right. And David, the how million year-over-year? up then

hand. went weren't and hand in RPO the adoption XXX we Well, so of --

So, that for didn't actually we year. last have calculus

if over the QX, and started RPO how has So, went climbed million-- in the again, building actually, off I progressively you back to current it been $XX think to $XXX up at year, and then QX, million since has

Right.

going next starting to comparison. year-over-year have So, year, we're

up release of wrapping this comparison, to our first We're going year XXX. but just is year-over-year

that booking should all just you since doing we you the any so give And project to it, we're XX% over RPO? to us for sense going were--? what do Jason, Was that probably be want with comment, the

I of bookings XX% very in What subscription trying so, actually we just to had the that about the and kind new healthy get the investor was in actually Jason talked -- that what's included some continue healthy, flavor terms supplemental. that's growth of be think and feeding to

color I that think the that trying provide. was to we're So,

Right.

and -- just wrong. so things don't get I So

to So, of misinterpreting would sort project next if I were situation? RPO year, be the would right XX% be or growing that that

I'll rather we say analysis and how we tell more before you why little RPO. a on a for I'd framework what, good grow to do you give you don't

Okay. And right. then All Jason--

-- of matter that's a wasn't just a guidance it -- all. from was perspective, It

to rather I'd -- take good bit give something So, has you fidelity. release a little time you really -- publicly give of again, that

Okay.

whole and about of were a right? died, that? Trump rebates come happened talking the and it think I pharmaceuticals. to Can quarters it ago, So, couple we prescription What back?

Yes is answer. short the

to from take So, going was that. Trump an perspective. changes administration to his actually to the to implement or cost necessary pretty and feedback it abandon started started some get -- decided time He the negative on industry get to

might proposals. something this customers. is the do going particularly area that I XX next I and you to -- competing visiting And And the was I interestingly now in this in in an enough, was just filled parties I over a both Europe as bunch over script, think mentioned but XX to months. of happen election have void year, But with in expect,

populations over drive way to actually live they're than ever And keep where efficient about system system. implementing they're try as a in to a in thinking there, healthcare having and that's up, the rebates really distribution longer struggling

is think couple dynamic we of are because over record the of going very us years, I good the So, takeaway compliance. continue is for that's next and to be system environment to this the for here

very great. you, Okay, both much. Thank

Pat. Thanks

At call time, would like I the to over Barter David turn closing back this to Mr. comments. for

you. really Thank it. further for joining No today. We Thanks us comments. everyone appreciate

conclude does This today's Thanks. teleconference.

a disconnect may time your evening. at lines this You have great and