Model N (MODN) 11 May 212021 Q2 Earnings call transcript

Greetings, and welcome to Model N's second Quarter 2021 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Gwyn Lauber, Director of Investor Relations. you. Thank

begin. may You

today on of Officer; welcome Model Fiscal earnings on Financial Year N's is N's Jason XXXX. And N's me March for Cathy Officer. Vice Gallegos, President second Officer; This with Director Model Lauber, Quarter and are XXXX, Ederer, Lewis, IR; Accounting Executive and John Blessing, Glenn Relations, to call the afternoon. Chief Rubin and call the Model Chief XX, Investor of Good FP&A which Chief ended

Our and was XXXX. the is year is fiscal regarding release quarter third made of The issued press information of after fiscal quarter for call this on call market posted primary not XXXX forward-looking and full outlook. the our to performance recent and filed of of may to obligation today's Commentary website. factors statements may current risk as We disclaim or any today are with to include second representing close Please provide and you materially. differ on most year as results forward-looking expectations the statements. our in our our outlook upon any with update should Form views purpose These financial forward-looking and the views subsequent SEC. our relied date. statements management's on Actual XX-Q any based refer as be

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Thank the call. everyone afternoon to on you, good Jason, and

data metric. highlighted, both strategy our this with development to our a of business As channel services and our beginning Jason quarter which results, The key have And such seen SaaS the impact large the sales last expectations are we are addition on can subscription products transitions, the and J&J impact, Certainly well team seeing to in expansions like continue QX our effect logo on customer our growth an be the Novartis execute every of elements drivers. exceeded and on as our we extension positive and quarter professional business of revenue. management, new Europe. of in validata services, including also other having

some had J&J $XX.X for the performance our year-over-year of we to overall grew a XX% in exceeded the here revenue XX% on of guidance looking that second and Professional business earlier as total at the acquisition and are year grew strong million. on quarter, mind aside Setting beginning the just guidance in for well, provided positive year. from upfront revenue guidance business $X.X XX% to of J&J of these is much recognition million driven top results comparison higher revenue services. revenue as to with And Subscription subscription the underlying last anomalies revenue of Services quarter, including organic and results due the we professional this at performing half On the grew impact services. by million, results $XX.X full tough year. first quarterly deal linearity affected last recognized in faced license revenue business of keep as million, QX Now at recognition boost ahead with that revenue separately, specifically QX $XX.X These our the accounting, by a a bookings from our year. Also, organic to our the line term looking a provided the revised the our utilization quarter growth. the well basis, the over timing revenue

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gross year. services professional versus for XX% last revenue margin was non-GAAP While XX%

the accelerated both for and an margins Operating last synergies business lower-than-expected non-GAAP had the the the services As to to On were from due management we overall quarter, call our services. last R&D of investments. on and quarter. QX timing gross this a QX some our for mix effect dampening comparable good noted from acquisition, of year Business overall expenses gross revenue margins N Model subscription organic professional on core basis, had cost

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share. per million to non-GAAP versus loss Finally, net per $X.X was share or our $X.XX non-GAAP expected of net $X.XX $X.XX income

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the our the as of deals, outlook revenue linearity has quarterly reflects Our profit. expected larger impacted quarter, also and SaaS first the which of such in impact subscription transition J&J

second the planned timing we Finally, of invest expect share-based fully future. for operating in $XX we particularly to due of slightly million, the non-GAAP range continue range in to of increase the of million, of R&D be EPS to subscription a range revenue to to income million $XX.X and on $X.X be third million some over half to per the total count to million expenses quarter, shares. of expenses summary, In as expect the to of million diluted the approximately XX.X $X.X year be for range do non-GAAP we to revenue to the be $X.XX to the million, $X.XX $XX.X in the operating share $XX in

be $X million. Finally, in $X.X EBITDA is adjusted the expected of range to million to

of the range For the full income range share revenue XX.X range million million million operating in to of $X.XX $XXX $XXX non-GAAP of the and range guidance shares. in to subscription in to million and the our approximately of per now fiscal million share of $XXX year a diluted count income $XXX fully non-GAAP revenue to XXXX, expect $X.XX, the based we $XX.X $XX.X on million, in are total raising million,

million. adjusted range For be expected operator to questions. the the over $XX.X back to of the us for to call now in turn EBITDA for Thank joining year, $XX.X today. is the you million I'll

[Operator Instructions].

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

I on wondering just contribution sales any maybe also what N Model least better maybe maybe the And more a tied line bottling you help, over And do with loss I'm at be Business it were of operating the and OpEx what the months? And the being be business. may XX, to in quarter. the the business in both the lower Deloitte Services team more ultimately to explained better think XX the achieved revenue curious front? narrower revenue I'm wanted top well. we what synergies have than next in start closely upside? The revenues areas of areas I the of business sense you but delivered quarter could

Joe, Jason. it's

the are very how quarter going. and So we're things pleased yes, with first

out, and This second pointed side, the hosting that's interest the on of and kind contracts. considerable As our you the sales to for transaction just accelerate able of customers prospects, areas the in generated expense synergies on our we particularly and overall And the business. we've areas has in of with demand integrated several part, some then forces. existing software were why

So fully got to this better next we've X and over better just have coverage serve capitalize opportunity opportunity X market and a on years. the us allow to the to

business other done studies of for seem need have you've third to are key cloud running. commercial from X and a associated where year? across And about of with be is with aligned interest applications and launch a interweaving the some benefiting you're really revenue other of maybe back well. some in I'm about done, or comments Deloitte But third thinking report the more and are what seeing studies and then seem more of areas state this seeing there the findings parties the there particular what they just Maybe of that being then to be parties in category timetable biotechs as given just the up solutions these going the biotech pharmas. mindful think and just that are would customers specific did kind traditionally your proactively getting findings That things the specific operation. more getting both wider well priorities the interest in? you're interest earlier appeal, curious I if little Are that to they the an

we've for cloud late And your talked and being you industry in had as customers. regulatory report about Yes, our that combination referenced as and comes think Joe, I cited it is work this might as the past, I Gartner in continuing we then think, adopting written the an the X to been pandemic a that -- well, and N things well I which, to of of from the accelerated home, to think, And simplify has of think and able or that with complexity the and of just from back from report in I saw go transformations, our has both similar Model have mindset these course, up both also to reports. IDC of notes, certainly we these that topics cloud-first digital we excuse trends. benefit really me, some

I in I of just continue would And investing from in and say to med continue a and invest we've thing we general, the areas it's modernize is of perspective. leave -- brothers The in X that product their strength tech to the segment with been industry it continue other we see them and that pharma, there. sisters. is along

from Our line Ryan next & with MacDonald question Co. Needham comes the of

And a congrats quarter nice on Jason. here,

is First the question SaaS transition. around

that transition during You mentioned that the X the customers of cloud offering. started the validated included quarter also

that Just the curious the customers N.? focused to are transitions all conversations at more on through transitioning, a transition expand only just with then to taking as shift to if opportunity but you're now transition from going in simply Model adoption or customers thinking not the continue strategically the seeing activity these you're

interest. our products increasingly have offerings that's lot are offering thing well a necessarily like on-premise that model we do couldn't think, couple not for that us to Ryan. catalyst a been customers. pitch the used. been of the quarters, cross-sells things be a that's for we another get have It's, It's great They not to some certainly a cloud particularly support last question, emerging They're just interest, customers that opportunity historically I a generate in to over in some the pattern so as offerings opened Validata lot economics. Yes. and upsells. and of our see to generates business to And is cloud that's larger as then other is emerged. That of willing -- and additional get upgrade that's value intelligence for going one to better an the of of enhanced

thing we'll created, for us when and So up economics say, also a but SaaS look for catalyst a incremental and because customers back of written, great history were it was our it I cross-sell sell. transitions the and is think because

Excellent. company driving And direct since job of with we're out of motions, particularly results years couple sales the joined force. Jason, done building follow-up the improved really for over a you go-to-market you've a my question, great past the strong

So of to was weeks pricing over high-tech interested announcement the life sciences vertical. with within the Channel the in Can you've your sort a here, that area of you few see last markets? talk motion to Nomex already, and innovations these the post guess, these sort of the start partnerships on about indirect global how of expect channels I quarter close you some contribute to to mastered end

Yes, of there's well, drive. types that -- really two we're looking of partnerships X types partnerships to

of we front. the that the to X price big is an some where drive the companies Global firms in engaged And value a helping ecosystem. our have big us to drive competitive together on example in great is Model is these of solution our and that are digital more be innovations and more for other marketplace with many consulting allow players and first customers. complementary The to products a transformations these X get of partnership very SI N catalyst more

even type example that an where about think we is channel for partnership most well. influencer of software. expect an the And partnership those. continue that buying So of And recent can to to interesting with us you as yes, high-tech Nomex before more us customers interesting partnering can can be be that think then is in in accounts see

JPMorgan. from comes question next Our line of Jackson Ader the with

the performing how of think to business first upside the talked a aspects? one is you simply being few the integration Model just Deloitte of of that in ahead right, better, quarter. was like the about The curious that do just just Or services, on business business on that of how much upside much schedule due and from independent I'm -- business, n? came you

kicked Yes. the the just to we've and contribute quarter, surprise. a integration gave thorny that it from the how honestly, quarter We both think we the rest combine of combination sure pleasant to we than were When vendors it's that this we then forces, the were seen had is with interest post-merger expecting negotiations upside last some I thoughtful issued things. would those performance. line sales And our the of and And the was we're contracts wanted guidance as for of off pretty business, much the and into on year. for it guidance that's customers getting and gotten Jackson, make top prospects, expense some opportunity expected. the going to and some that seeing of we driving better a quite assume all

So it upside. in came of together a was the combination things really that

That's great. And then a follow-up for John.

revenue side. the On SaaS

transition, forward goes just go-forward there's So in SaaS we cloud forward pull But move less a we to And revenue. then would makes revenue first, basis, a quarter? recognition or announces why transition in revenue on J&J would clarify understand make SaaS how steady? much some the was the can why -- I that the as someone SaaS when

into make got QX. just I Yes. of the up it Well, so it doesn't steady, necessarily pulled that that some fact less it's

if you if quarters. all so and of alter for deal, a And the by deal, typical you that with upfront subsequent it of time, you over ratably think period about recognize it that recognizing less ACV more just you leaves a

side the short J&J So that's there. kind on simple the answer the of

you. much then in the And revenue how quarter? Got the SaaS

Yes.

on & inclusion at of said of Business I I last you up we give probably comparable Deloitte We we frankly, X% in what of light need to I metric was that about Services. up The were quarter, about look reevaluate that and -- the acquisition metric XX% So this to the quarter, if organic think a basis. this we talked if about last But is, quarter. an that

line Our the Peterson from question Brian Raymond next James. comes of with

strong the quarter. Congrats on

the a you be of the of trying bit Is can and kind that terms mentioned. Obviously, the efforts are of the to of sales capability breadth of hit seeing about going we're efficiency in and to think on what Yes? be? understanding go-to-market wanted a integration lot the and portfolio little I by this? So the some Just some measures. there are generated to efficiencies of marketing what anything

growth the be things. really on Brian, the more on go-to-market of least side it At side, will

As in to we One, I said and team. had in fairly get my a services. Deloitte prepared remarks, And small announced and team deal prospects. the started they business interested became inside from feedback services customers as sales this business of

so thought was to And make coverage. really the sure appropriate it we we important had

well pleasant developing about as that other services a I around part portfolio. think weren't the the business and innovating has thing that's as to emerged us services had talk surprise been Deloitte a that we've of customers potentially

the So of think, teams putting I accelerated product the we've that's and are and our go-to-market been reasons integration why also, X together.

just more to us view think much going I of the it's market it. serve comprehensive how we a and give

Understood. maybe in it you about Jason could you you prepared expand your pipeline Tech on in commentary, confidence know you there the I High made or seeing kind coming Anything what gives that? in of and talked you're back. the that

and different giving I there. a number shoots to We're a bit things are of starting in Tech, would green cite us Yes. there's confidence certainly that High see that more

very And of prospects. at encouraging. the our have customers prospect side particularly rainmaker things and account. attendance We was record Both

side target about I and team who RFP the we within activity then that cross-sell a several was our with And to other to talked been the up. As on pipeline, accounts trying just then with past logo then prosecute And execute we're see Tech High healthy. the has good been Targus on and and the well has in engage the signed at deals quarter, number as look solidified. has new certainly base. upsell calls, trending it

of from with Our next Craig-Hallum. comes Nick question Mattiacci the line

quarters? Could ramps for on think, I And you past also will on then deal these few mix the And plan to talk mix for return for? deals deal of the the in the any utilized mature where quarter outlook Bennett. that of as Mattiacci levels? relative ramps in was Nick will is comment to, it use deal about your you your This that pre confidence pandemic then XX% Chad ramps the

question, Yes. Nick. Good

our times were in a was deals Pre-pandemic, over quarter-to-quarter. back And we I'll did about tick each pre-pandemic I'm a things levels, deal bit it for So up XX%, this couple then reported, logos. that particularly new X of quarters. to above quarter quarter. ramping of little as past last pleased previously the that at have ramps XX% say, to actually X/X fluctuated we

talked we our we that to of the we the need expecting last go in call down. that new the as got and there would about were particular, so logos, on And on other ramp side pandemic

continue deals them transition of quarter anticipate And talked started have But it we new mitigating to our in That's seen the deals renewing the strong. of ramps those logo ramping started part near well X of to ago. past, about customers SaaS have so is to as rate, as We some we've in ramp some good And space. in deals the in then do the are speak. an costs flight. use early some particularly this as forward. to on so very that help ramps, the in as the always some offset going see are mean And of that transitions at we've We to term. renewed, I gross current as full in we years important see renewals about

well. remain confident we as there So

any just and deal of Awesome. give still And within current characterize your finally, customers can commentary products? then just base? expansion around how And existing the you then revenue more how much would us you cross-sell within exists opportunity ramps around additional

Yes.

we also tied upsells, a about And not upsell opportunity, it's really ramps address roughly excited to we're of quantified ramp and working So much months upsells there's just SaaS couple amounts XX lower growth when less millions cross-sells and XX have able we've dollars. under of And transitions, stimulates transition. biggest growth next hundreds top of opportunity belt, now which lever that we about dozen in of cross-sell customers. we're as transition for of because will me, projects unless, we do one But cross-sells course, tend dozen large and flight. that a a opportunity, typically of months transitions. our because SaaS excuse those the And just We we're turn multiple it's a through but into of XX SaaS in products the part projects -- a over SaaS are years the in ago, our had got then lever our of to remaining the terms quicker. first go and Gilead. to on at be or typically, live

those to good it's see attaching start patterns to transitions. So upsell to cross-sell SaaS

the question Colliers. next with line from comes Mannheimer Gene Our of

there to good that? $X.X Congrats quoted, wanted all services? I subscription quarter. contribution on a or that about the million to component that Deloitte Or services ask another any X thing was business. business you Was

it speaking. is total on Ederer Gene, didn't to piece distinction, those of we've forces have and moved that this of than much I guess harder down harder was more as provided as integrate thing as guidance the it. merged would and well. started further That we we that say the million. this existing to draw business, nor $X.X lines revenue, cross-sell that sales will the I break one particularly John is And rapidly get to to it customers We specifically have

what provide the we number, a So revenue that's terms little want million in to did is. bit and insight additional of the $X.X total of

Okay. Fair think think sales we are level dedicated, of I Again, how might rate greater that given the be it about But growth in of murky know may should integration. business the we that resources business? being about how enough. growth services? post And

to to on I they offerings tie out. of going Gene, continue came growth together. then X questions of John portfolio see new the services whereas X the for that One, harder split Yes. I'll Deloitte reasons. cited, we included together, of develop to guiding specifically reason in the We're we're the get that it's when to teams services going blend -- prior answered. to not weren't back that the the And business just

will million reported on give specific of be to hard you really this $X.X a it's number see So that the a that Sure. top just growth quarter.

No, understood. number every is And not you a XX-month RPO? lastly, report report did the that quarter? you Or

John is Yes. this Gene, again.

also in current that for the and portion. in XX-Q, was $XXX is million was $XXX So It number filed total million today. the which

comes Terry question of the next line from Our Tillman with Truist.

This actually and to analytics them. the wanted space is Conor the on are for product customers Terry. about consuming just that talk I

that I of was expansion. Deloitte something terms enable that going help business So area is know in that the to

in of these customer what of So these adoption products trends see kind heading? terms just you of key and then with wondering seeing you're where kind products

Yes. It's a question. great

the a new Deloitte of analytic business rationale was we questions, of I've the the came get of acquisition that services. did gross-to-net. generally a product as part answered lot called of in And offerings over there's new some So in these interest from some of past

product then relatively has of for is that with Cloud Intelligence the us lowest the penetration So And a services. customer some new our business in base.

one for get so of that And transactional provide transitions. able been growth through the represents key known so sophisticated to well being systems we as of top analytics on the really we've SaaS opportunities historically

SaaS do on You Cloud. advantage be Intelligence our to take of have to offering

apps contribution some And along think Cloud, Intelligence so with will interesting Validata, the I like very of other growth. continue future to analytic to be

Our VanVliet the next with from comes line of question Matt BTIG.

you forward guess shots went you whether how as the into to have at some involved comes or future? are participation a Have look terms about either throughout at product in longer-term that on booster of I the as had potentially health much of in developing you network new And in or kind started it's companies rollouts a helping look whatever year, more be vaccine you going global that? of looking care basis. global in this the a

Yes. Thanks question, Matt.

Pfizer vaccinated. happy through So I'm in to I've report, came shots it got both terms of participation, and just I'm fine.

then who of participation. customers important therapies a terms activity honestly, every mean, products tech participating and of increased of product an from usage one was seen that. that have a result the are support and I of our of And so devices med as forth in in in we secondly, pandemic, our So perspective,

And rules past opportunity the to as since pandemic, future, we've the there. learned do as access market report record mean, we strategies to look and continue our So saw revenue there really strategies. we're from I help has be well, think state are forward, in And going been is market, potentially and to accelerate a we that benefit yes. pricing in just continue one decisions. the this a that slight we If there's of have strategies, there to then pricing completely commercial rethought in continue I we lot thing tailwind in these to changed. to system to time the have of for the underneath operated certainly

seem think about Deloitte the at then you transaction the is it. and with the pre-revenue Can just us kind were how And that Got of market. opportunities times? touched at some that brought larger like, bit you look you at it you progressing? little pharmas of as of looking to pipeline to help companies earlier, sorry more the market a just on but partnerships looking as what sort that if of those is especially be I'm with

Yes.

commercial or significantly the when are As to that a infrastructure authorizations we part to approvals into we our announced talked on of And the pre-commercial commercial look the in this up a process. at that continues horizon would activity modernize management of boosted that's the consistently to in see on it we and that in just companies that we're about, just their we this, accessing -- get multiple I those now if approval deal, horizon, continue pick see quarters of and revenue they place. plus the know number that market significant a pre-revenue lot need say And X generally accessing you market not TAM.

that's us to way. also some why world market, that and companies So sell do the to buy about of to up excited part want a in Services Business we're business customer it because opportunity now to us largest management. the access wants services, this that sell Pre-revenue able part how allows an of acquisition the gives to be but revenue

the Ladies gentlemen, call like to of back end over remarks. session. turn have I would this Jason reached and closing today's for to we question-and-answer Blessing Mr.

to of the call. everyone, all you, We Thank and nice today's thank you have quarter, forward certainly you. and throughout for attending operator, talking evening. you, Thank to look a

today's conference. This concludes

you your at and Thank rest of enjoy disconnect your evening. time. may You this participation for the lines your