Model N (MODN) 4 Aug 202020 Q3 Earnings call transcript

Greetings and welcome to the Model N Third Quarter 2020 Earnings Conference 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. It is now my pleasure to introduce your host Mr. Officer N. Financial Chief Barter, for Model David Thank you, sir.

may begin. You

June welcome Good year call on And is with to today Financial for Officer. the Jason N’s and Barter, XXXX, XXXX. Model David Model ended me fiscal earnings Executive Officer. of Blessing, the afternoon Model Chief Chief This quarter N’s which call on XX, is third N’s

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continue on As will last to earnings and strength existing supporting the on focus customers. we discussed sales efforts our call, of our pockets

impact ball not it felt I some I'd was color quarter David, macro level this and our sales like to a on to expect the do suggests an favorable the this next Before incorporated our continue pipeline. this is to for environment you, state few elongate to of our over uncertainty. the important to give due share trend. the but exception long-term quarters, but ongoing Typically, economic I with do of turning cycles pipeline to we into guidance, you detail make

high Sciences to pre-March see did Life late We year. deals levels. currently pipeline segment is a our as pipeline High decline Specifically, been at and point has spring Tech not for in the building this pushed our has returned and out, its in yet

times XX% are our tangible Tech business High pipeline have and fact critical, customers related nearly relatively increased continues that the Sciences. trends We difficult mission the than since their can its ROI sector actually While manage predictable less are the in spring help a believe present. to low, these Life be to like products has favorable

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Jason. you, Thank

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fully revenue be to million to operations of subscription X% be range $X.X We end range Adjusted to million and approximately non-GAAP million based of the $X.XX, million the the the representing range share income from XX expect of is million, million in in income approximately expected to $X.X Non-GAAP range per be $XX $XX.X the share diluted $X.XX account of EBITDA million. at top growth to in a to on of in $X the shares. of of $X.X is expected to range.

the year full expect of million. $XXX.X XXXX, $XXX.X to range total For revenue in fiscal we million

revenue subscription to of the expect We in million range $XXX.X million. $XXX.X

approximately of non-GAAP diluted million to EBITDA XX is $XX income to range non-GAAP to range in the the expect expected of in we $X.XX, profitability, to share million the in from Adjusted account $XX.X Turning a of million. range million of $XX.X and operations $XX.X million fully on be share $X.XX per income based to shares.

the Before team's by for thoughts to call some share this way ability environment the current working. opening adapt am with final to you. like I'd up impressed and to I new our of questions,

We platform. are on closing our bringing deals customers and live

base customer pipeline, that new deal We continue believe deals has to will closing as expansions logos, inclusive of continued transitions. Our SaaS we Jason highlighted grow. and

that financial expect ramp. likely we most a However, will deals include

payment also customers We to will provide expect continue billing our flexible with that we terms. and

quarters. November, of outlook move I I any in fiscal you And year. high will also updated environment. provide of financial revenue perspective will given coverage, visibility will it preliminary variables. half fiscal the will years, and note over fiscal builds on that past couple with important It year year XXXX. a today's for call. in hedge our of In first initial Our as the joining then the Thank first through line an XXXX include year factor for a to It's the for we for macro degree provide will outlook these

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

session. Thank we and conducting Instructions] Ladies be you. question-and-answer you. Thank now the [Operator will gentlemen,

from with question the first of Please Our comes Joe with proceed question. your Vruwink Baird. line

I that's get Jason, able the it and you and back to revenue provides, in think more being new doesn't it the cloud of the environment past, pipeline wanted was the everyone. by thought to the would alluded getting this the logo be of Hello, like type go I to behind that to be the Great. In in fact seem and comments. certainly may ROI maybe case. challenging front

fact source it has the is you N how just that target attribute implementation execution, wondering the running really easy I'm product if more strategy type you unpack, the the of the been get resiliency; up could you health that zone of timelines those the it's do of attribution the talked cloud just a XX, about itself success just of any the accelerated factors you go-to-market these C, much right A, commence to and is environment. Curious B, this to week in and Model verticals So XX if maybe or value of now? or

Yeah, thanks Joe. for the question,

So all with rank, the I had team our And of mix and would go-to-market that of of some it's those last couple we've and to selling how honestly the force quality quite made years. a over they're the start factors. of changes I of if

have in with of we've and conjunction team think right ROI really changed now approach I our in stages load qualification right front building and customers. to the place got the the the

CEOs. has of certainly served deals us last CFOs And more being over and when time that So serves years. a extremely in are well it the as well, couple by frankly, scrutinized

in particularly where – would Sciences, the in cases, gone COVID. but say them. these cases, period of during High this case many do would Tech I think I the two for favor, is very Sciences, I resilient therapies or Life of just say Life also that and these are in up particularly dependent in are provided being that in therapies also customers, is durable businesses negotiable not markets, are many demand thing are on second people The our they're products And actually have in and very the

delivery early is last we've we And of high on help ROI actually calls a talked through cycle on customers of that part be is couple just excellent. are on delivery. that market capabilities, our does that comfortable And talked get budget it. to the sales going realized about the about quality yes, So the certainly more in time the as

the really it's of mentioned. a combination So things you

And up, then there follow this right new SaaS a once for forum maybe was rate. – upon and growth if maybe the was update I thinking isn't I long-term targets, was that can revenues a time to sustainable the XX% but

going Life is think XX% say maybe you this just pretty you've High challenging thoughts year. successes do your you're degree, in the better the I Sciences and to than whether can reflect directionally some better there? you by coming strongly, XX% back Tech than had a building pipeline, on environment When XX%

feel the are several XX%. demonstrated last that we above we've Yeah, Sciences we comfortable with transitions particularly quarters, including over And of that been XX%. And continue has positive north with think tail number resiliency be the can to to feel we wind then that number. comfortable SaaS as providing, of that continue and the directionally very that Life this number quarter

Thank Great. much. very you

Joe. Thanks,

Thank you.

line of with Terry Please SunTrust. comes proceed question the question. with from next Tillman Our your

We're times I fluidity in a normal N? business. this pipeline regulatory regulatory my of change. the a different create in And changes. for been yet other I sure and that had it's maybe was And there's you then to Thanks more the and did dated, the taking Good helpful. the new reason kind follow sales just one Jason up? past But call going job of I always anything should solid and there's actually guess, and Model is quarter talk the changes incrementally kind Medicaid kind color change another than and tourist appreciate now afternoon, Is I of I when that Yeah. that to sales that to pipeline of Jason out course reflects there do securities questions. on David. get make

particularly continues I for dynamic be parties N. are not same issues. cycle we customers, regulatory costs I less into go an Yeah, And the are Both the going the opportunity both low addressing thing for and both but prepared a remarks, generally lower to both of complex in this. for would Republicans ultimately say the pocket out different price be of pushing presents to Democrats speaking, very and consumer, an of Model theory mentioned But as necessarily election way it's more with transparency for dealing them environment of dynamic in my and regulatory the our have of income challenges the ways as elderly. environment

that to to looking So of driving of some sight we dynamics that a the can N talked is talk the to help our for line I some Model environment, pipeline and people directly reason to and to see some relief. doorstep, dynamic regulatory

a two-part All it's I'm savvy like and him I ask leave going But and upgrading. you top will look live Pfizer customers, to involve XX customer Dave be as of and because or want –David your another out to going right top see this. at nice that here question don't to

past mentioned Novartis you I think quarter.

How for timing SaaS we Thank add just we've David's you the the to Jason, question how about feel the top last relates of some we had first an Science So time the low into been and part you. kind is, rate customers update. seeing? of transition? forward to Life months of their about the of maybe, similar trajectory your three since digit decline then kind and do this like maintenance the do And double going of think

so top think recent the Yeah, top trends with companies, the five, particularly I continues, SaaS behind And Pfizer are of persist. examples. XX pharma momentum some so transitions secular both and there's the – Novartis

these workforce have continues And to about regulatory talked with customers. to the year. from largely a of critical and that's so be As to this I into to continues we the very ever, resonates a it's M&A than continue part of XXXX approach environment cloud now first working first solutions some going And more home our persist. Terry, now your dynamic. mission question, entire

so quite you the second to end year take do the honestly years. David, to XXXX this part? the to that have for I XXXX, want at And of next continue of we enjoyed expect momentum the throughout persist, couple

then And Terry, regards to rates we maintenance, to in for retention maintenance very find be revenue still think sticky. I

year So I of mid-single said roughly the as time, last think area exception think in into – of this kind churn that that year I continues seen, about you've with at maintenance being we digits. to this SaaS And kind transitions I that think, of track level. hang

So over on-prem cutting the the they'll power think and then will continue to cloud. continue I customers' to product

you. Ryan & proceed of move to company. line Needham question, from on MacDonald your comes question. We'll next our which Please Thank the with

in in managing the more externally? externally? some about your internally Is over that competitors. and the Jason of terms marked news migrations thanks bringing some guess, you side. way versus the just any, questions. with for few on I'm been sort there surprised taking M&A think hi, continued services Yeah, seen shift with implementations Dave, of I professional really you've about the for my shifted house Is versus there Now, obviously to pleased partners the of with there's strength and past be those that and months

Hi, answer that. It hasn't. I'll Ryan, this Jason, is

said as that going partner see business continue our year, of in transitions part couple we the there particularly SaaS implementation services services flight. sales and foster particularly demand we and our grow the the we to strong over that well, that business professional seen in is to last just of enjoyed ecosystem, out that being the SaaS to years, and quarters are as for of fact, very couple In the with we've representative That continue strength go to partner large these be we've that over of into the and we QX to as through of significant there's really ecosystem, some transitions next the a of continued ecosystem. current amount knowing expect throughout so continue our have grows, be to friendly

state in So it's reflective any versus the the business more current changes of of strategy.

as spend outcomes of Excellent as we impact about and think follow sort anything doing environment a there? around, potential expense regulatory forward. the that of pharma evolving Is there does and heard investment new based of we've you'd more in And investments, space. they're about then up, there contracting dollars are a How any you be the sort moving of Thanks. R&D evolving putting this pricing, particularly meet and incremental to sort the need?

fact, if just portion of certainly, Sciences the in in outcome capacity regulatory Life mean, based our good model. of that it a look product at oncology just that the I price Yeah, team, our some functionality and addressing is have you ongoing basic of pricing, do today most requirements, our supports we customers' based on

kind level. just we it then would say a of bumping I And that up also something handle actually that's today. So

we the on envelope at expense changes side. coming absorb to going can we're we change are in we the on a you have products expect in and would company, the in think Sciences long-term If lot product, should calls, be build stated you investment that as look of I – these our a current we but invest not regulatory expect continue in Life said, past investment That and to durable margins, address on more a to levels. step that

next our question Raymond James. your to comes Brian question. on Please from move We'll the Peterson which you. with of Thank proceed with line

for Hi, thanks call. for Kevin on here guys, taking my Brian,

to products of customers you've show the past some haven't making those levels anecdotally them opportunity? available recent of if for the anything that attach wondering to they broader expansion and to in your could seen mentioned newer You've initiatives, rates maybe or activity historically up-sell share that the capabilities some leveraged. you of pipeline I'm contributing context much the just on And in

simpler and deployable the even sandboxes perhaps of our base new that in products. then very much maybe tool also that we've transitions and not one, very they is as in a really made major And to had have way get customers to have products our exposure releases install cost-effective utilized in used has had have products as products we've effective this new large sandboxes on-premise a do cloud, Yeah, fairly a a a to the try would objections you it they've been the products you we way. in for past customers and our that of a perhaps of things, their helped where deals. And scale SaaS expect from to us of perspective. footprint in all can overcome in been do the have it out really handle customers volumes catalysts sandboxes. it's one two in years, that's used, of expose to comfortable cloud products we particularly And some number And

played it has an So important role.

Got the offering then know have speak flexible And mentioned in it, several helpful. billing any you're conversations changes say there been and those the that's renewal payment can to But And some any over with you to customers timeline in customers. seeing changes you last activity? terms months? I for

That's a great question.

–I'd we what overall line with think I'd I in expected May. what timelines are shared – largely back are the in say and the say in

the – how thought the needs cadences in terms, it continues the largely or their to the in say right in response customers about but as are where ecosystem, in need discretionary in depending whether they for structures, say we COVID. the different expected wheelhouse have side with in I'd they're They certainly, roughly now, upon they're right probably think I the, line May. maybe we whether sit more I'd the in of

guys. Thanks, Understood.

Absolutely.

Thank you.

you. Thank

with Matt BTIG. comes with your Our question proceed Please next from VanVliet question.

but just forward conversations in 'XX. it of year my to taking curious end event? back some vaccine I hope as there'll market guys, for with maybe that modules the which COVID guess to towards with them calendar and as that Obviously, look they there with such forward be hasn't most look is and Hi, as through are for to really thanks something half at is talking what more increase you're all the Obviously, customers? you demand get to the of calendar you pandemic, your soon What global question. sales demand, what one like? activity about, been some therapeutics customers of but seen as understand can an there and scale and time coming done, help on or going been have is that precedence other look are your to into your

thanks the question, Yeah, for Matt.

seen in pandemic plan new And their the and in our areas and one in for do about a have companies offerings sales. to that and going expand again, US as to So XX need certainly that that the remote pharmaceutical with both customers do landscape and have are whether drive be to things to of in they products. their private the to see into private used in may ways addressing related current with Life main commercial sector new talked And so to well be a many which top are along uptick or those certainly to they're dynamics workforces, are continues a cracks pandemic. logo of – I conversation of response customers, and therapy That cases be can invest government all persist have the healthcare Sciences as seeing pipeline, is Model to that N one demand of continues segments we customers. modernize of N footprint, in so that the continue demand or selling the and believe different the sector are our cloud in regulatory we I US to looking subjects XX of systems in that an continuing available pandemic number the Model that geographies, to new be to then Current also XXXX. in the in smaller earlier pipeline in growing the have

look billings I what revenue there sort balance in deferred we kind like big as of down maybe customer payments at look last on question quarter out any, of the of calculated of about a Are slowed on the year Great guess, basis, and that here. How and beyond? pushed think I guess jump quarter? to back fiscal end we the renewals as overall should metric look the we or that into that and

question. great a It's

an deferred our and continue past And an find I QX, on flexible effectively the we will leverage we metrics. when had the call, we just we that what invoicing which and go-to-market of is, structures, last on adjust shift impact you'll the think time cycle revenue, as be about how is to some think out with XX% to we from had work these impact they're our requested highlighted industry, had fundamentally think their some we say that customers. on customers couple cycle about our billing to I'd I have the think to accustomed I our of quarterly a what of learnings of with terms

as impact impact contracts that that things revenue RPO like ultimately so or And to deferred we customers. our ultimately will provide flexible could

work as part think as to see our deferred get a kind through I we cycle, little of we probably the bit customers. revenue of pushed you'll adapt of So needs way our the economic around this

Right, you. thank great,

Thanks Matt.

Thank you.

Please a of question. Our comes with line Craig-Hallum. with next proceed question from Mattiacci your Nick

Bennett. my is for Thanks for questions. this on Mattiacci Hi, Nick taking Chad

last. it this margin gross decently like quarter up subscription over So looks ticked pretty

color think margins gross Just as especially should subscription going of then SaaS Thanks. mix any more becomes there would helpful? forward, we how revenues? And a be about larger

the Nick, it. question. appreciate for Thanks, I

you I our back were in a think making talked of go we couple investments some about model. quarters, we if delivery had

and produce dividend. those of their way now some work some starting investments are to And through

you new feel continuing model our stay we're serving So XX and to for customers about And support Obviously, we we're on watermark here. is our and work if us. a XX where about the we think deliver think probably we we right long-term about in not goal good But a is I if customers high modernizing an how delivery how support be get now. our ways how had our XX. that is to more and us clearly, model to to an is point. it ending continue good at productive. find is XX And work place limit and upper customers for But about that and

you. thank it, Got

Thanks Nick.

you. Thank

question question. the Gene with Please of proceed Mannheimer company. from Dougherty line your with & comes next Our

the think have X I mean, flow, Good I provide you of million terms Thanks. the free quarter cash – guidance cash typical Dave, you following great for plus guide. and and on in and can just Jason flow Congrats your any year? or afternoon. you in did free the seasonality half first

first it's we've for of the Gene deal million X to the the as bit and Gene, made. way QX through structure. three the a we're that think quarters clarify, still more year, just little – obviously way Thanks and progress our working I to it's where through working our

So where success to we're my to shared with earlier to think starting year. look is terms, you'll I continuing it adjusting that working in work replies, one year I look fiscal it's this little to starting but and one that had we've a hard of customers at build our probably Admittedly, we're – kind continuing that we're up as towards it. of forward to just I and to find the bit then on think And obviously, year. setting next continuing

a that's terms color, the about net of Thanks. bookings of expansion wins market you're that that Thanks. in existing new called right, so All helpful think share vis-a-vis share Dave. how should base seeing, logos? we wallet And your versus

easier fashion mentioned agreements been and QX already QX trust. new higher We've that long-term continue the the company one. That base where well. that was Life and play our a place do relationships is customer quarter. first overall take easier see it's to out on actually, growth and been driving of commentary given I'll QX on It's and as Sciences strong seen performance I pipeline Gene. and on today day master expansions got environment. in QX we the in is macroeconomic as we've in logo services Thanks And my do to that similar it our the Yeah. just pipeline, than very that built said, in pipeline

good of you customers cycles definitely So bookings. this, like I think a economic in as often see section contribute to

capture I next few both do that to for continue will we and also leaders market the market share expect quarters. However,

That's great. Jason. Thanks again,

Thanks Gene.

you. Thank

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

spend Thanks like on guess the line on I XX% on kind dollar to – come for basis margin, follow it margin subscription saw for curious I'm taking you level gross guys. we the you said the cost increased up of do from but around actual you a down. on those question, David, just on subscription, the the efficiency the subscription come dollar Where know, being expect questioning. on on my line? I of – of I'd plan gross

Sure.

the bit of work earlier what a think we to largely, we we've have in more I little the year, work still completed had do. that highlighted lot a

the modern of all the agreements put some not we've infrastructure. terminated So there have we is legacy that of is place, there and infrastructure a – spend in still between redundancy some for in then the

incremental they then we on contracts, an would basis as and so end, dollar absolute And some you those to savings. an terminate where find come that's

that Okay. new increase a outset? these that want next for bit I on looking couple logos, flexibility that of customers then you're That you've out going but years, – year makes And structures for maybe at for I the to sense. seeing types to little a press of on their payment are you deal structure or demand the terms, type mentioned initial know to ramps customers of the the new provide

the depending so and we'll pay projects some that in the as And of capturing they arguably spot some horizon a as that in escalating ecosystem, result, they're calendar the they the already structure they're like. for they're next I ultimately, about and benefits that where us this the Jackson seeing so, think a the in And they economics what these where from working and five ROI it as upon months are within year. that what are they're the N do looks platform. puts are We thinking customers investing you in for start a – deal climate align live we go sit Model or through their try think may towards how

the start we're for work prepare them with future So they as to to happy stay.

Okay. All excellent. right, you. Thank

Jackson. Thanks

no additional we this time. at appears questions have Thank you. It

So for any I'd closing the to Barter comments. pass additional to like over floor Mr. back

throughout joining operator. the everyone you, call today's forward We speaking well we greatly with Please to take look Thanks and Thank and appreciate so care. quarter. you much. be

for gentlemen, lines and you today's concludes this Ladies may at this and time. We your teleconference. disconnect participation you your thank