Model N, Inc.

Good afternoon and welcome to Model N's second quarter of fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. With that, I would like to turn the call over to Carolyn Bass, Investor Relations.

Good afternoon. Welcome to Model N's second quarter of fiscal 2022 earnings call. This is Carolyn Bass, Investor Relations for Model N. With me on the call today are Jason Blessing, Model N's Chief Executive Officer, and John Ederer, Chief Financial Officer. Our earnings press release was issued at 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 of fiscal 2022 performance, and offer a financial outlook for a third quarter and fiscal year ending, September 30, 2022. The commentary made in 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 10Q 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 an isolation from, GAAP results. Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in the earnings press release issued today. which is available on our website. I encourage you to visit our investor relations website at investor.modeln.com to access our second quarter press release, periodic SEC reports, and the webcast replay of this call. Finally, unless otherwise stated, all financial comparisons in this call will be made through our fiscal year 2021 results. And with that, let me turn the call over to Jason.

Thanks, Carolyn, and good afternoon, everyone, and thank you for joining our call today. Our second quarter results outperformed across the board, exceeding all key guidance metrics, including total revenue, subscription revenue, professional services revenue, and adjusted EBITDA. We also had another very strong bookings quarter, which when combined with our Q1 performance, positions us well for a strong second half. And as previously discussed, we are targeting to exit our fiscal year at a 20% SAS ARR growth rate as we anticipate this key metric to accelerate in the second half of the year. As you will hear when John gives guidance, we are confident that we are in fact on track to hit this important milestone. In Q2, we closed SAS transitions with two of the largest pharma companies in the world. As we have shared on our recent calls, we expect 2022 to be a pivotal year in SaaS transitions as the conversion of remaining on-premise customers to the cloud accelerates. I am also pleased to share that we're ahead of our first half internal plan for SaaS transitions, which is one of the growth levers driving upside this year. Even more importantly, we are seeing a meaningful amount of our bookings this year coming from non-SaaS transition deals, which bodes well for our future. Given the success we are seeing with SaaS transitions, we also continue to see our maintenance decline at an accelerating rate compared to recent levels. Declining maintenance is a seminal event in any on-premise to SaaS transition story, and we view this as a very positive trend as Model N completes its evolution to a SaaS business model. Next, I'd like to share some quarterly business highlights. During the quarter, we signed SAS transitions with two of the largest pharma companies in the world, Sandoz and Pfizer. Sandoz, one of the largest generic drug manufacturers in the world, is a subsidiary of Novartis, who you may recall started their SAS transition last year. The positive momentum on the Novartis project influenced the decision to start the Sandoz project and we are very excited to partner with both companies on their digital transformation. The decision to launch Sandoz's SaaS transition was based on a rigorous business case that outlined the following benefits. To take advantage of Model N's latest analytics to improve contracting strategy and overall profitability. To always be on the current, most secure version of Model N with the latest compliance updates. and to adopt the industry's best-in-class revenue management solution to support future growth while allowing Sandoz to be nimble in today's dynamic regulatory environment. The Sandoz and Novartis teams have been long-time partners with Model N, and I am thrilled about our exciting future together and being personally involved in these projects. I am equally as excited to kick off Pfizer's SAS transition, another longtime customer that is also going through a digital transformation to further improve patient outcomes. Once their SAS transition is complete, Pfizer will also benefit from improved system security and performance, lower total cost of ownership, and access to the latest innovation and compliance updates. And speaking of innovation, we have been working very closely with Pfizer to build a new product to address the growing number of states that are implementing unique requirements around drug launches and price transparency. I am pleased to announce that Pfizer is already live on version one of the product and partnering with us on the next version that will come out later this year. State price transparency management is a great example of how we leverage our technical and industry expertise to rapidly build and deploy a new product. And we continue to see our pipeline grow for this new product as more and more states roll out new legislation. On the high-tech front in the first half, we saw strong execution driven by new logos and great upsell activity by our customer success team. High-tech has exceeded my expectations in the first half of this year. Also, a large portion of our high-tech bookings in the first half were driven by our customers who are starting to invest in their infrastructure at a more healthy rate. If you recall, high-tech had a bigger slowdown during the pandemic than life sciences did, so I'm pleased to see momentum continuing to build in this important part of our business. Turning to professional services, Our team continues to deliver substantially all of our projects on time, on budget, and at best-in-class margins. This delivery excellence is also playing a key role in our sales cycles given the multiple proof points we have on predictable, rapid time to value for our customers. I expect continued strength in our services business throughout this year as the team has built a substantial backlog. We also have a healthy portfolio of projects in flight as our services teams continue to lead Model N's transformation to a cloud company and help our customers with their own digital transformations. We have also had several successful go-lives recently, and I thought I'd highlight one of them for you. Kyowa Kirin, or KKI, is a new logo we signed within the last year that is already live and receiving benefits from Model N. Headquartered in London, KKI is a rapidly growing specialty pharmaceutical company with 16 locations in Western Europe. Their implementation involves configuring our global price management solution to handle 30 products sold in 41 countries using seven different price types. With one centralized platform and a unified process, KKI is realizing several benefits. Model N allows them to assess the impact of pricing decisions throughout a drug's lifecycle and allows them to execute pricing strategies more effectively with global collaboration. They can now also visualize trends related to pricing and approvals across their product portfolios through Model N's analytics. KKI is another great example of Model N winning a new logo and successfully guiding the customer through a rapid implementation. Our business services team also continues to validate our investment visas of increased TAM by adding new logos, as well as executing on customer expansions. Now that we've fully integrated the business services team, we are seeing continued growth in our pipeline and strong competitive wins. I'd like to highlight one of the business services wins in the quarter at Amilex. Amilex is a pharmaceutical company based in Cambridge, Massachusetts, that is dedicated to the development of innovative new therapies for neurodegenerative diseases. This is a perfect example of our ability to attract a smaller pre-commercial company with our business services offering. Amilex was in the process of seeking FDA approval for a drug to treat ALS and selected Model N business services for their revenue management and compliance needs. Our solution will assist Amilex with enrollment in and processing of government programs, including government pricing, Medicaid, TRICARE, and 340B. Amilex selected Model M due to our deep expertise and track record of assisting emerging pharmaceutical manufacturers with successful product launches. In March, we held Rainmaker, our 18th annual customer conference, This event is a thought leadership and educational conference and brought together more than 700 executives and industry experts from around the world. At Rainmaker, I outlined our future vision of the company, something we're calling Model M 3.0. This is the next evolution of Model M that will allow us to meet the dynamic customer and industry needs and expand our solution portfolio around three core offerings that all complement each other. Model N 3.0's primary business will continue to be cloud-deployed software, and we will continue to look for ways to expand our footprint through building new offerings, M&A, and potentially partnerships. The second dimension of Model N 3.0 involves building a meaningful data and analytics offering. This represents a compelling new opportunity for us and will be a strong complement to our software solutions. I think we are uniquely positioned to provide sophisticated, industry-specific analytics because of our strong domain expertise and unique proprietary data set gathered from years of transactional processing for our Blue Chip customer base. The third and final dimension of Model M 3.0 will be expert services. Expert services will grow into a portfolio of software-enabled services that are designed to help customers address the unique complexities of their industries and be more effective at leveraging our software and data offerings. The acquisition of Deloitte's business services team was a signature acquisition to accelerate this part of the Model N 3.0 vision. It is our belief that Model N 3.0, with a more strategic solution portfolio and an amazing engaged team, will have the ability to drive sustainable, profitable growth and will represent a compelling, differentiated investment over time. Also at Rainmaker, we rolled out our annual State of Revenue Research Report. This report surveyed over 300 senior executives with direct responsibility for revenue management at companies in life sciences and high tech. The insight from this report can help investors understand some of the current trends that we're seeing in our vertical markets and why we believe that we are well positioned for the future. The key takeaways are that revenue leakage and compliance continue to be top of mind, and these are the problems that Model N solves. In life sciences specifically, the headline is that regulatory compliance at state and federal levels is a concern for the vast majority of executives. In fact, nearly two-thirds of pharmaceutical executives expect that managing compliance will get even more difficult in 2022. In support of these findings, and as we've outlined on our recent earnings calls, Our new state price transparency management solution is receiving a lot of interest from customers and prospects. State price transparency management is the industry's first software solution that enables pharma companies to automate state price transparency compliance. 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. In closing, I'm proud of how our team has performed in the first half of this year. We're executing well across all growth levers, including SaaS transitions, customer expansions, new logos, and international. I am also very proud of how our team continues to stay focused and execute in a very dynamic global environment. This dedication and strong execution resulted in an excellent first half, and puts us in a strong position to accelerate our growth and profitability as we exit 2022. I'd now like to turn the call over to John to discuss our Q2 financial results and provide an update on guidance. John?