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spk05: Greetings and welcome to Model N second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Gwen Lauber, Director of Investor Relations. Thank you. You may begin.
spk04: Good afternoon, and welcome to the earnings call for Model N's second quarter fiscal year 2021, which ended on March 31st, 2021. This is Gwynne Lauber, Model N's Director of Investor Relations, and with me on the call today are Jason Blessing, Model N's Chief Executive Officer, John Ederer, Chief Financial Officer, Ruben Gallegos, Vice President of FP&A and IR, and Kathy Lewis, Chief Accounting Officer. Our press release was issued after the close of market and is posted on our website. The primary purpose of today's call is to provide you with information regarding our second quarter fiscal year 2021 performance and our financial outlook for the third quarter and full fiscal year 2021. Commentary made on this call may include forward-looking statements. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may differ materially. Please refer to the risk factors in our most recent Form 10-Q filed with the SEC. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, GAAP results. Reconciliations of non-GAAP metrics to the nearest GAAP metrics are included in the earnings release issued today, which is available on our website. I encourage you to visit our investor relations website at investor.modelend.com to access our second quarter fiscal year 2021 press release, periodic SEC reports, and the webcast replay of this call. Unless otherwise stated, all financial comparisons in this call will be to our fiscal year 2020 results. With that, let me turn the call over to Jason.
spk10: Thanks, Gwen, and good afternoon, everyone. Thank you for joining our call. Today, I'm pleased to share highlights from Model N's second quarter. Looking back over the last year, I am amazed at how much progress Model N and our customers have made despite the challenging environment. I am proud of the positive impact our customers have had fighting the pandemic and helping us deal with these challenging times, and we are humbled to have played a small part in their efforts. I am once again happy to report that our quarterly results exceeded our expectations. Our success this quarter was driven by a healthy mix of large SaaS transitions, customer expansions, and new logos from both high tech and life sciences. Our professional services team, despite being remote, also continues to execute well on project delivery and is playing a critical role in moving our customers to the cloud. Today, I will provide more detail on our business, plus I will share some market insights that we revealed at our recent customer event, as well as some perspective on the rest of the year before turning it over to John. Our strong Q2 performance was powered by two large SaaS transitions and continued strength in our professional services business. Customer expansions and business services, which we recently acquired from Deloitte, also made significant contributions to our results. Total revenue, subscription revenue, services revenue, adjusted EBITDA, and non-GAAP EPS all exceeded our guidance for the quarter. I am also pleased to report that we are well ahead of our plan to integrate Deloitte's business services team, which we purchased approximately 130 days ago. We have been able to accelerate many of the operating synergies planned for later this fiscal year and the next through renegotiating key supplier contracts and thoughtfully managing other expenses. We have also integrated our sales teams, which we believe will allow us to fully capitalize on this important market opportunity in the coming years. Our outlook for the year reflects the solid progress we were making with this business. As we've discussed previously, One of our largest near-term growth opportunities is the transition of our on-premise customers to Model N's revenue class. This is important because it simplifies our business model, which we believe will continue to drive operational efficiencies. SaaS transitions are also important because they are a catalyst for cross-sell and up-sell opportunities as customers modernize their Model N applications and renew their relationship with us for the long term. Since the announcement of J&J's SaaS transition last quarter, our sales team continues to make significant progress planning out SaaS transitions with our remaining Life Sciences customers. Industry reports published by IDC and Gartner support what we're hearing from customers and prospects, stating that pharmaceutical and biotech companies are prioritizing cloud applications in their IT budgets. and analysts are projecting that this vertical will continue to see IT investment in 2021 and beyond. We believe that life sciences companies will accelerate their digital transformations and leverage cloud-based solutions like Model N to improve overall regulatory and commercial compliance, which directly touches top and bottom line performance. As an example, during the quarter, another top five pharma company, Novartis, joined J&J and started their SaaS transition. This particular customer has been with Model N for over 10 years and understands the value of our offerings because they help them simplify the complexity of their US operations. After evaluating our cloud offerings, including new functionality combined with the ease of taking updates, Novartis decided that Model N is the best partner for them for the next 10 years. We believe that Model N's cloud platform will provide them with the agility necessary to handle today's dynamic operating environment. Also in the quarter, a top five med tech company and a global leader in diabetes care and also a longtime Model N customer kicked off their SaaS transition. In doing so, they also expanded their product footprint to include Validata. Validata is a great product that helps customers audit high-volume rebate claim submissions against the actual contract to ensure accurate payments. In this case, we are replacing an aging custom-built on-premise solution with Model N's validated cloud offering. This is a great example of how SaaS transitions are a catalyst for customers to evaluate new Model N products. For business reasons, this customer also needs to complete their go-live this year and given Model N's strong track record for delivery, they felt that we are the best partner to help them with their objectives and their digital transformation. We remain very actively engaged with all of our customers, particularly our Life Sciences Big Ten customers, who are increasingly looking to Model N SaaS offerings to help them compete in their dynamic markets while remaining compliant in an ever-changing regulatory environment. I am pleased with the progress that our sales and professional services teams continue to make with our customers, and I believe that we will continue to see strong adoption of our cloud products by our largest customers over the next several years. In the quarter, our professional services team continued their strong execution as they lead our customers to the cloud and maintain a very strong track record for quality and on-time delivery. As someone who started my career in professional services, I feel that the level of quality in this team is some of the best I've seen in my 25 plus years in software. This team also continues to innovate around our implementation methodology by leveraging our expertise from working with our largest customers and investing in new approaches to enable companies of any size to be successful using Model N's products. This team's work is greatly appreciated by our customers and admired by everyone at Model N. During the quarter, we also had several successful customer go-lives. For example, a top 10 biopharmaceutical company that focuses on new approaches to life-threatening illnesses and chronic conditions went live with their upgrade to the full suite of Model N products. During this project, the customer also took advantage of several new enhancements in our product, and retired the majority of their legacy customizations. This project is a great example of a two-step approach that some of our customers are taking to move to the cloud, an initial project to get them current and cloud-ready before taking the next step and moving to SaaS. On our call exactly one year ago, as the uncertainty caused by the pandemic was increasing, I stated that we would continue to invest in key growth areas, including our new logo sales team. It's our belief that leaders invest during economic downturns, and this allows them to accelerate into the recovery. Building out our new logo sales team is one such example, and this investment is leading to new customers as the economy starts to recover. We also made an important move in Q2 by training our new logo team to sell our business services offering. Historically at Deloitte, business services relied heavily on big Deloitte to drive sales, and as a result, they had a relatively small sales team. Now at Model N, our entire new logo team is enabled to sell the service along with all of our other core product offerings. I expect this to drive growth as we are able to serve a larger portion of the market and sell however a customer wants to buy revenue management. During the quarter, we also signed a new logo with the European division of a global biotech company that is dedicated to developing transformative cancer therapies. This new customer will use our global pricing management and international reference pricing solutions to better compete in their European market. This deal actually signed in January, and I'm pleased to report that the customer is already live on Model N. This is a great example of our new logo team opening an account, creating future cross-sell opportunity, in this case their U.S. operations, and then our professional services team delivering a rapid packaged implementation. Our high-tech business continues to recover and has made steady progress since this time last year. In the second quarter, we signed Targus, a new logo and a well-known global supplier of computer accessories and peripherals. The high-tech team has also had success with cross-selling and up-selling efforts, adding new products in select accounts, such as channel data management and our high-margin recurring revenue education offering. I believe that the increased activity that we're seeing in our high-tech vertical, particularly following our Rainmaker customer event, suggests that this vertical is on its way to recovering. Now I'd like to talk briefly about some of the insights from our state of revenue report that we published at our recent Rainmaker customer event. I think sharing this information with you is important as it will help you to understand some of the trends that we're seeing in our vertical markets and why we believe that we are well positioned for the future. In life sciences, the headline is that change is the new normal and gone are many of the approaches from the last 20 years. Regulatory environments in the U.S. and abroad are increasing in complexity, and many life sciences companies believe the impact on their business in 2021 will be even bigger than in previous years. Model N's domain expertise allows us to simplify this complexity for our customers and easily provide updates through our SaaS delivery model. Second, the pandemic has had a significant impact on our customers and their revenue management processes. During the pandemic, customers developed therapies in record time and had to determine how to price and bring them to market, all while working from home. As our customers adapted to this new reality, it reinforced the need for an agile, best-in-class cloud approach to revenue management. In high tech, I'd also like to highlight a couple of key trends. First, artificial intelligence is moving from a much hyped technology to an important business enabler that can have a positive impact on how customers manage channel economics. Model N is leading the industry in this area with the introduction of AI into our core revenue management products, which helps customers make better, faster decisions around deal economics. And the second key trend in high tech is that industry consolidation, combined with increasing channel complexity, is resulting in the need to have better visibility and financial controls. Model N offers a full suite of applications, including channel data management, rebates and market development funds management, and pricing that enables a unified approach to the channel for our customers. The full state of revenue report, which includes a significant amount of additional detail, as well as replays from our Rainmaker customer event, are available on our website. I invite you to take a look at them and learn more about the products and the industries that we serve. In closing, I'm pleased with our results for the quarter. I'm proud of how our team is executing, and I am optimistic about the opportunity ahead for Model N. The increasingly complex regulatory and business environments present significant challenges for our customers, but an opportunity for Model N to help them navigate and thrive in this world, given our team's deep domain expertise and our vertical solutions. I'd now like to turn the call over to John to discuss our Q2 financial results and provide an update on our guidance. John?
spk02: Thank you, Jason, and good afternoon to everyone on the call. As Jason highlighted, we continue to execute well on our key growth drivers. The impact can be seen in our Q2 results, which exceeded our expectations on every metric. Certainly large SaaS transitions, such as J&J last quarter and Novartis this quarter, are having a positive effect on both subscription and professional services revenue. But we are also seeing the other elements of our strategy beginning to have an impact, including customer expansions with products like Validata and Channel Data Management, the addition of business services, the development of our new logo sales team, and the extension of our business in Europe. Now looking specifically at our results for the second quarter, total revenue grew 21% to 48.2 million, including 6.5 million of revenue from business services. Subscription revenue grew 24% to 35.9 million, and professional services revenue grew by 12% to 12.3 million. These results exceeded our guidance for the quarter, with the overperformance driven by the earlier timing of subscription bookings, as well as strong utilization on professional services. On a year-over-year basis, the acquisition had a positive impact on our overall top-line growth. In looking at the organic business separately, keep in mind that the J&J deal in Q1 affected the quarterly linearity of our revenue this year. Also, just as the upfront revenue recognition from J&J provided a boost last quarter, we faced a tough comparison here in Q2 with much higher term license revenue recognized last year. Setting aside some of these anomalies due to revenue recognition accounting, the underlying business is performing well, and our first half results and revised full-year guidance are ahead of the organic guidance that we provided at the beginning of the year. Turning to profitability, Non-GAAP gross profit for Q2 was $27.4 million, or a gross margin of 57% versus 62% in Q2 last year. Non-GAAP gross margin for subscription revenue was 66% in Q2 versus 72% last year, while non-GAAP gross margin for professional services revenue was 29% versus 35% last year. As we noted on our call last quarter, the mix of revenue from business services had a dampening effect on our overall gross margins this quarter. On an organic basis, the core model end business had comparable non-GAAP gross margins to Q2 last year for both subscription and professional services. Operating expenses for Q2 were lower than expected due to accelerated synergies from the acquisition, good cost management overall, and the timing of some R&D investments. As a result, adjusted EBITDA for the quarter was 3.2 million, or a margin of 7%, which was flat versus Q2 last year and well ahead of the high end of our guidance of break-even. Finally, non-GAAP net income was $1.6 million, or $0.04 per share, versus our expected non-GAAP net loss of $0.05 to $0.06 per share. Looking at the balance sheet and cash flow, we ended the quarter with $148.3 million of cash and equivalents, which was up by about $5 million from the end of December. Our free cash flow for the first six months of fiscal year 2021 was $2.4 million compared to $3.3 million last year. Free cash flow for the current fiscal year includes transaction-related expenses of $2.4 million, as well as the impact of operating losses associated with the acquisition. Now I'd like to provide you with guidance for the third quarter and update our outlook for the year. It's important to note that our guidance for Q3 in the full fiscal year includes the expected impact from the acquisition. Our outlook also reflects the impact of our larger SAS transition deals, such as J&J in the first quarter, which has impacted the expected quarterly linearity of subscription revenue and profit. Finally, we do expect operating expenses to increase slightly over the second half of the year, particularly due to the timing of some planned R&D expenses as we continue to invest for the future. In summary, for the third quarter, we expect total revenue to be in the range of $48.5 to $49 million, subscription revenue to be in the range of $35.5 to $36 million, non-GAAP operating income to be in the range of $1.8 to $2.3 million, and non-GAAP EPS to be in the range of $0.01 to $0.02 per share based on a fully diluted share count of approximately 37.1 million shares. Finally, adjusted EBITDA is expected to be in the range of 2 to 2.5 million. For the full fiscal year 2021, we are raising our guidance and now expect total revenue in the range of 189 to 190 million, subscription revenue in the range of 139 to 140 million, non-GAAP operating income in the range of 13.7 to 14.7 million, and non-GAAP income per share in the range of 21 to 24 cents, based on a fully diluted share count of approximately 36.8 million shares. For the year, adjusted EBITDA is expected to be in the range of 14.5 to 15.5 million. Thank you for joining us today. I'll now turn the call back over to the operator for questions.
spk05: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. In confirmation, someone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handstand before pressing the star key. One moment while we poll for questions. Our first question comes from the line of Joe Brewing with Baird. You may proceed with your question.
spk08: Great. Hi, everyone. I wanted to start with the Deloitte Business Services business, the contribution in the quarter. both better revenues and also a narrower operating loss, better than at least we were bottling it in the quarter. And I'm wondering, I think the lower OPEX you explained well, I'm more curious on maybe the revenue front and what areas of the business, you know, maybe just being tied in more closely to the model and sales team help, but what areas of the business may be delivered top line upside and, Do you have any sense of what maybe revenue synergies ultimately could be achieved over the next 12, 18 months?
spk10: Hey, Joe, good afternoon. It's Jason. So, yeah, we're very pleased with the first quarter and how things are going. As you pointed out, you know, we were able to accelerate synergies in several areas on the expense side, particularly in areas of hosting and some of the software contracts. And then on the second part, just kind of the overall demand for the business was you know, this transaction has generated considerable interest with our existing customers and prospects. And that's why we've integrated our sales forces. So we've just got better coverage and, you know, have a better opportunity to serve this market and allow us to fully capitalize on the opportunity over the next two to three years.
spk08: And then just going back to some of the findings in the State of Revenue Report and maybe, you know, interweaving the interest you're seeing in this specific category and then some of the other comments from the third parties just about cloud applications getting wider appeal, more interest across both biotechs and pharmas. Are there things that you're seeing particular interest in? You know, I think one of the findings is that biotechs are thinking a little more proactively about getting these solutions up and running, maybe with an earlier timetable associated or just being more mindful of what they need as they launch a commercial operation. That would seem to be well aligned with what Deloitte traditionally did well, but I'm curious if there are other specific areas, given the studies you've done, studies third parties have done, that seem to be really benefiting your business and kind of where the key priorities are for customers this year.
spk10: Yeah, Joe, I think in one of your notes you might have also cited the IDC report that we referenced as well, and Gartner's written some similar reports. And, you know, it certainly comes back to a combination of the things that we saw in our report as well with just regulatory complexity continuing to go up and Model N being able to simplify that for our customers. And then I think, you know, as we've talked about in the past, I think this is an industry that had, you know, been late to adopting cloud. And, you know, the pandemic and work from home, I think, has really accelerated the cloud-first industry. mindset and digital transformations, which of course, we benefit from both of these topics, or excuse me, from both of these trends. You know, the other thing I would say we continue to see strengthen is just is med tech in general. And it's one of the areas that we've been investing in from a product perspective. And, you know, we see them continue that segment of the industry continue to invest in modernize along with their pharma brothers and sisters.
spk03: Great. I will leave it there. Thank you. Thanks, Joe.
spk05: Our next question comes from the line of Ryan McDonald with Needham & Co. You may proceed with your question.
spk11: Hi. Thanks for taking my question, and congrats on a nice quarter here, Jason. You know, first question is, around the SaaS transition, you mentioned that, you know, one of the customers that started the transition during the quarter also included the Validated Cloud offering. Just curious if you're seeing a shift in the conversations at all or the adoption activity as you're going through these transitions from customers that are simply just focused on the transition to customers now thinking more strategically of not only transitioning, but then taking the transition opportunity to continue to expand with Model N. Yeah, it's a great question, Ryan.
spk10: That is certainly a pattern that's been emerging over the last couple of quarters, particularly as we get to some of our larger customers. You know, the They're not willing to upgrade to the cloud just for better economics. They have to see additional business value. And so that's opened an opportunity for us to get in and pitch some of the other products that customers historically have not used. It's, I think, going to be increasingly a catalyst for cross-sells and up-sells. Validator is one that generates a lot of interest. Our intelligence cloud offerings generate a lot of interest. And then things that we couldn't necessarily do as well in the on-premise model, like offering enhanced support offerings, are another thing that's emerged. So I think when history is written, we'll look back and say SaaS transitions were a great thing for us and our customers because of the incremental economics it created, but also because it was a catalyst for cross-sell and up-sell.
spk11: Excellent. And for my follow-up question now, Jason, you've done a really great job over the past couple of years or since you joined the company of building out a strong go-to-market motion, particularly with driving improved results with a direct sales force. So I was interested to see, you know, sort of post the quarter close, you know, over the last few weeks here, you know, the announcement of, you know, partnerships with Channelnomics in the high-tech area and global pricing innovations on the West Sciences verticals. Can you talk about how you expect these indirect channels to start to contribute to a motion that you've sort of already, I guess, mastered within some of these end markets? Thanks.
spk10: Yeah, there's really two types of partnerships, well, three types of partnerships that we're looking to drive. The first is on the SI front, and these big digital transformations that Model N is helping to drive at many of these companies, a great catalyst to get more engaged with big consulting firms. and some of the other players in our ecosystem. Global Price Innovations is an example of a solution partnership where we have two products that are very complementary together and allow us to be more competitive in the marketplace and drive more value for our customers. So, you can expect to continue to see those. And then, yeah, Channelnomics is the most recent example in high tech of us partnering more with an influencer. that is in accounts before customers even think about buying software, and we think that can be an interesting partnership, or that type of partnership can be interesting for us as well.
spk11: Great. Thanks again, and congrats on a great quarter. Thanks, Ryan.
spk05: Our next question comes from the line of Jackson Ader with J.P. Morgan. You may proceed with your question.
spk02: Hey, guys, thanks for taking my question. The first one is on the business services, the Deloitte business, right, and the upside in the quarter. I'm just curious, you know, how much of that was, do you think, due to that business just simply performing better independent of Model N or how much of that business upside came from, like you talked about, just being ahead of schedule on a few integration aspects?
spk10: Yeah, Jackson, it's a combination of all those things. When we issued guidance last quarter, we were just getting post-merger integration kicked off and wanted to make sure we gave thoughtful guidance on this business, both for the quarter and how it would contribute for the rest of the year. And I think as we've gotten into it and seen the opportunity to combine our sales forces, the interest that we're seeing from customers and prospects, You know, that's driving some of the top line performance. And then, you know, quite honestly, you know, the expense upside was a pleasant surprise. We were expecting some pretty thorny negotiations with some of the vendors that we had to, you know, where we had to assume the contracts. And that ended up going much better than expected. So it was really a combination of things that came together in the upside.
spk03: That's great. And then a follow up for john on the SAS revenue side.
spk02: So first, how much was was SAS revenue in the quarter?
spk10: And then just can we clarify, you know, why would you know, I understand that the when someone announces or goes to the cloud makes a fast transition, there's some pull forward in revenue, but on a go forward basis, why would the J and J, SAS transition make
spk03: you know, revenue recognition as we move forward less steady?
spk02: Yeah. Well, so it doesn't necessarily make it less steady. It's just the fact that some of that got pulled up into Q1. And so if you think about a deal, a typical ACV deal, and you recognize it all randomly over a period of time, if you alter that by recognizing more of it up front, that just leaves you with less for the subsequent quarters. So that's kind of the simple short answer on the J&J side there. Gotcha. And then how much is the best revenue in the quarter? Yeah. So if I look at that, and this is, frankly, a metric that we probably need to reevaluate in light of the acquisition of Deloitte and the inclusion of business services. But if I give you the comparable metric to what we talked about last quarter, I think last quarter we said that was up about 19%. This quarter, we were up about 8% on an organic basis.
spk03: Okay. All right. Thank you.
spk05: Our next question comes from the line of Brian Peterson with Raymond James. You may proceed with your question.
spk02: Hi. Thanks for taking the question, and congrats on a strong quarter. So I wanted to hit a little bit on some of the integration efforts you mentioned. Obviously, we're seeing a lot of efficiency measures. Is there anything in terms of of the go-to-market and the capability and kind of understanding what the breadth of the portfolio can be. Just trying to think about, you know, what are some of the sales and marketing efficiencies that are going to be generated by this?
spk10: Yeah, at least on the go-to-market side, Brian, it'll be really more on the growth side of things. As I said in my prepared remarks, you know, the business services team inside of Deloitte had a fairly small sales team. And as you know, we announced this deal and started to get feedback from customers and prospects. One, they became interested in business services, and so we thought it was really important to make sure we had the appropriate coverage. I think the other thing that has been a pleasant surprise that's emerged as well is we've had customers talk to us about innovating around business services and potentially developing services that weren't a part of the Deloitte portfolio. So, You know, that's also, I think, been one of the reasons why we've accelerated the integration and are putting our product and go-to-market teams together. I guess it's going to give us a much more comprehensive view of the market and how we serve it.
spk02: Understood. Thanks, Jason. And I know you made it in your prepared commentary. You talked about maybe high-tech coming back. You know, anything you could kind of expand on there or what you're seeing in the pipeline that gives you the confidence in that.
spk10: Thanks, guys. Yeah, we're certainly starting to see green shoots in high tech, and there's a number of different things that I would cite that are giving us a bit more confidence there. We have record attendance at our Rainmaker account, both customers and prospects, and particularly the prospect side of things was very encouraging. As we just look at our target accounts and who we're trying to engage with on the high tech side, that number has been trending up. RFP activity has been healthy, and then the pipeline, as I've talked about on past calls, has certainly solidified. And then it was, you know, it was good to see the team execute well in the quarter, sign a new logo with Targus, and then prosecute several other cross-sell and up-sell deals within the base.
spk03: Thanks. Thanks, Brian.
spk05: Our next question comes from the line of Nick Medichini. With Craig Hallam, you may proceed with your question.
spk01: Hi, this is Nick Mariachi. I'm for Chad Bennett. Thanks for taking our questions. Could you talk about the mix of deals in the quarter that utilize deal ramps relative to, I think, the 50% mix it was in the past few quarters? And then any comment on your outlook for when the use of deal ramps will return to pre-pandemic levels? Then also your confidence that these deal ramps will mature as you plan for.
spk10: Yeah, good question, Nick. So, a couple of things that I'll say. Deal ramps, you know, have fluctuated quarter to quarter. Pre-pandemic, we were ramping about a third of our deals in each quarter. And then, as we've previously reported, it did pick up to, you know, 50%, a little bit above 50% at times over the last four quarters. I'm pleased that this past quarter was actually back to pre-pandemic levels, particularly for new logos. And so we talked about on the last call that, you know, we were expecting as we got on the other side of the pandemic that new logos in particular and our need to ramp there would go down. And so, you know, we have started to see some of that in this current quarter as well as in some of the deals that are in flight. You know, we do continue to, you know, anticipate to use ramps, particularly on SAS transitions going forward. That's always an important part as we help customers offset some of the transition costs in the near term. But it is good to see ramps mitigating in the new logo space. And then as we've talked about in the past, I mean, our gross renewals are very strong. We started ramping deals about three years ago. And as some of those early ramp deals have renewed, we've seen them renewing at, you know, at the full rate, so to speak.
spk03: So we remain confident there as well.
spk01: Awesome. And then just any more commentary you can give us around your revenue expansion within existing customers around deal ramps and cross-sell of additional products? And then finally, how would you characterize how much opportunity still exists just within the current base? Thank you.
spk10: Yeah, so when we do cross-sells and up-sells, there's typically much less of a ramp, unless, of course, it's tied to a large SaaS transition. But Typically, cross-sells and upsells will have lower amounts of ramps just because we're, you know, able to turn those projects or, excuse me, products on and the projects tend to be quicker. And then in terms of, you know, remaining opportunity, you know, we're 18 months into SAS transitions. We had our first one go live at Gilead 18 months ago. We've got about a dozen under our belt, roughly a dozen in flight. and now are working through the biggest part of the SaaS transition growth lever over the next couple of years as we address our top 20 customers. And we're really excited about that opportunity because it's not just a growth lever for SaaS transitions, but also stimulates that cross-sell and upsell opportunity, which we quantified in multiple hundreds of millions of dollars. So it's good to start to see those cross-sell upsell patterns attaching to SaaS transitions.
spk03: Thank you. Thanks, Nick.
spk05: Our next question comes from the line of Gene Mannheimer with Colliers. You may proceed with your question.
spk07: Thanks, guys. Good afternoon. Congrats on a good quarter. I wanted to ask another thing or two about the Deloitte business. Was that business services contribution that you quoted six and a half million all services, or was there any subscription component to that?
spk02: Hey, Gene, this is John Eders speaking. That was total revenue, the 6.5 million. We didn't break it down further than that, nor have we provided guidance specifically on that piece of it. And I guess the one thing I would say is that as we have moved to much more rapidly integrate this business, it will get harder and harder to draw those lines of distinction, particularly as we've merged the sales forces and started to cross-sell to existing customers as well. So we did want to provide a little bit of additional insight in terms of the total revenue number, and that's what the $6.5 million is.
spk07: Okay, fair enough. And how shall we think about the growth rate of that business? Again, I know it may be murky post-integration, but Given the greater level of sales resources that are being dedicated, how might we think about growth in business services?
spk10: Yeah, Gene, we're not guiding specifically on the growth of business services for two reasons. One, the reason that John just cited, whereas we blend the teams together, it's going to get harder to split out. And then I'll tie back to one of the prior questions I answered. You know, we're going to continue to see new offerings that develop that weren't, you know, included in the Deloitte portfolio of services when they came together. So it's really hard to give a number that, you know, will just be a specific growth on top of the six and a half that you see reported this quarter. Sure.
spk07: No, I understood. Thanks, Jason. And lastly, did you report the 12-month RPO, or is that not a number you report every quarter?
spk02: Thanks. Hi, Gene. This is John again. Yes, so that number is in the 10-Q, which was also filed today. It was $204 million in total and $108 million for the current portion.
spk03: Perfect.
spk02: Thanks again.
spk03: Yep. Thanks, Gene.
spk05: Our next question comes from the line of Terry Tillman with Truist. You may proceed with your question.
spk09: Hey, everyone. This is Connor on for Terry. Thanks again for taking my question. I just actually wanted to talk about the analytics product space and the customers that are consuming them. So I know that the Deloitte business is something that was going to help enable that area in terms of expansion. So just kind of wondering what kind of key trends you're seeing with these products in terms of customer adoption and then where you see these products heading.
spk10: Yeah, it's a great question. So part of the rationale of the Deloitte acquisition was we did get a new analytic product called Gross to Net. And, you know, as I've generally answered in some of the past questions, you know, there's a lot of interest in some of these new offerings that came over from business services, so with business services. And then the Intelligence Cloud is a relatively new product for us that, you know, has some of the lowest penetration in our customer base. And so being able to provide sophisticated analytics on top of the transactional systems that we've historically been known so well for really represents one of the key growth opportunities as we get through SaaS transitions. You do have to be on our SaaS offering to take advantage of Intelligence Cloud. And so Intelligence Cloud, along with some of the other analytic apps like Validata, I think will continue to be very interesting contributions to future growth.
spk03: Great, thank you for the call. Thanks, Connor.
spk05: Our next question comes from the line of Matt Vanzio with VTIG. You may proceed with your question.
spk06: Yeah, thanks for taking the questions. I guess as you look at how the vaccine rollouts went through throughout the year, have you had much in terms of participation in that? And as you look forward, you know, into whether it's booster shots or, you know, whatever kind of comes about some of this longer term on a global basis. Have you started looking at, you know, either developing a new product or, you know, helping companies that are going to potentially be involved in a more global healthcare network in the future?
spk10: Yeah, thanks for the question, Matt. So, in terms of participation, I'm happy to report I'm vaccinated. I got both Pfizer shots and came through it just fine. So that was an important participation. And then secondly, I mean, from a product perspective, you know, every one of our customers who are, you know, participating in therapies and honestly, you know, med tech devices and so forth in support of the pandemic, you know, we have seen increased activity in terms of usage of our products as a result of that. So that, you know, there has been a slight tailwind there. Yeah, I mean, as we look forward, you know, I do think there is potentially opportunity really just to, you know, to continue to help accelerate pricing strategies, market access strategies. If there's one thing that we learned in the pandemic, and we certainly saw this in our state of revenue report as well, you know, the rules we've operated underneath in the past have completely changed. And time to market pricing strategies are going to have to continue to be refined. the commercial system record for a lot of these decisions.
spk06: And then as you look at, you know, some of the opportunities that were brought to you with the Deloitte transaction and the pre-revenue market, you know, can you just help us think about kind of how that pipeline is progressing? I'm sorry if you touched on a little bit earlier, but just sort of what that market is looking like, especially as more of those companies seem to be looking at partnerships with the larger pharmas at times.
spk10: Yeah, as we talked about when we announced this deal, you know, that's a significant part of the market that we, you know, we're generally not accessing or consistently accessing and it significantly boosted our TAM. And I would say, you know, three plus quarters into this now we continue to see a lot of those pre revenue companies that, you know, see a commercial approval on the horizon, multiple commercial approvals on the horizon know that they need to modernize and get their revenue management infrastructure in place. And, you know, that that activity in the pre commercial market just continues to pick up if you just look at the number of authorizations that are in process. That's part of why we're excited about business services, because it gives us an opportunity to access that part of the market, but also be able to sell how a customer wants to buy revenue management. Pre-revenue up to some of the largest companies in the world do want business services, and this acquisition now allows us to sell that way. All right.
spk03: Great. Thank you. Thanks, Matt.
spk05: Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Jason Bussing for closing remarks.
spk10: Thank you, operator, and thank you, everyone, for attending today's call. We certainly look forward to talking to all of you throughout the quarter, and have a nice evening. Thank you.
spk05: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and enjoy the rest of your evening.
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