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spk06: 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.
spk05: 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.
spk12: 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?
spk02: Thank you, Jason, and good afternoon to everyone on the call today. As Jason noted, we had a strong second quarter, exceeding all of our guidance metrics. Revenue upside was driven by both subscription and professional services, while our strength in adjusted EBITDA and non-GAAP EPS was driven by the strong revenue performance and continued good cost management. Our strong bookings performance over the first half has improved our outlook for the year, and you'll see that when we discuss our guidance later in the call. Turning to the financial results for the second quarter, total revenue grew 11% to $53.3 million, which exceeded the top end of our guidance. Subscription revenue increased to $38.2 million, also exceeding the top end of our guidance range. And we saw upside in professional services revenue, which grew by 23% year-over-year to $15 million. Looking at profitability for the second quarter, total non-GAAP gross profit was $31.9 million for a gross margin of 60% versus 57% in Q2 last year. Non-GAAP subscription gross margin improved to 67% versus 66% in Q2 last year. And non-GAAP gross margin for professional services was very strong again in Q2, hitting 42% versus 29% a year ago. But this team continues to execute extremely well. Operating expenses for Q2 were lower than expected due to the timing of some hiring and other investments. And as a result, adjusted EBITDA for the quarter was $6.6 million, and well ahead of the high end of our guidance of 4.5 million. Adjusted EBITDA margin was 12% for Q2 versus 6.3% a year ago. And Q2 marks the fourth consecutive quarter that our EBITDA margin has been back in the mid-teens. Finally, non-GAAP net income was 4.9 million, or 13 cents per share, which was 5 cents ahead of the high end of our guidance of 8 cents per share. On the balance sheet, We ended the quarter with $170.5 million in cash and equivalents, which was up $15 million from the end of December on very strong cash collections. I know that some of you look at calculated billings, which is typically defined as revenue plus the sequential change in deferred revenue. For Q2, calculated billings were up 5% year over year, which is in stark contrast to the strength we are seeing in RPO, which I will discuss in a moment. Calculated billings can sometimes vary depending on invoicing cycles and other factors. We typically focus on RPO, which is a gap metric and a measure of our total backlog, as we believe this is a more meaningful indicator of the underlying health and predictability of our business. Turning to RPO, or remaining performance obligations, the total balance was $284.6 million at the end of Q2. representing an increase of $81 million or 40% year-over-year. The current portion of our RPO balance was $123.4 million, which grew by $15 million or 14% year-over-year, and the non-current RPO was $161.2 million, an increase of $66 million or 68% year-over-year. The high growth in RPO reflects the strong bookings performance over the first half of this year and provides better visibility for future contracted revenue. As a reminder, during the year, we continue to expect strong growth in SaaS revenue to be offset by declines in maintenance revenue as cloud migrations accelerate. To give you a better indication of our success in transitioning from on-premise to SaaS, we have begun disclosing SaaS ARR. This represents the annualized value of our daily subscription revenue for the most recent quarter. As we've noted on our last couple of earnings calls, we anticipated a more challenging quarter in Q2 from a comparison standpoint. This did transpire in the second quarter as we finished with $89.9 million in SAS ARR, which was up 17% on a year-over-year basis, while our trailing 12-month net dollar retention on SAS was 116%. Both of these numbers were slightly below recent trends, but again, as we previously commented, We expect SAS ARR growth to accelerate over the second half and exit the year at our 20% growth target. Now let me turn to our guidance. For the third quarter, we expect total revenue in the range of $54.5 to $55 million, subscription revenue to be in the range of $39.2 to $39.7 million, adjusted EBITDA to be in the range of $7 to $7.5 million, and non-GAAP EPS to be in the range of 14 cents to 16 cents per share, based on a fully diluted share count of approximately 37.2 million shares. For the full year of fiscal 2022, we are increasing our total revenue range to 215.5 to 216.5 million, with subscription revenue expected to be in the range of 156 to 157 million. We are also raising our outlook for adjusted EBITDA to a range of 27.5 to 28.5 million, generating non-GAAP EPS in the range of 56 cents to 59 cents per share, based on a fully diluted share count of approximately 37.3 million shares. In summary, I'm pleased that we've been able to navigate this transition and make an acquisition, all while maintaining strong profitability, generating good cash flow, in meeting or exceeding expectations. Running a responsible, balanced, profitable growth business is very much a part of our DNA. While we're in the midst of this transition, a good proxy for our future progress towards the Rule of 40 is to look at SAS ARR growth plus adjusted EBITDA margin. Looking at our targeted SAS ARR growth of 20% plus the implied adjusted EBITDA margin from our FY22 guidance today would put us at 33%. which is illustrative of our continued profitable growth objective. Now, I'll turn the call over to the operator for any questions. Operator?
spk06: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone 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 to pick up your handset before pressing the star keys. Your first question comes from Ryan McDonald with Needham & Company. Please go ahead.
spk00: Hey, thanks for the question. This is Matt Shea on for Ryan. Wanted to touch on Model N 3.0. We learned at Rainmaker that 3.0 will allow customers to create a mix and match and ultimately create hybrid offerings. curious what kind of opportunities this creates that you maybe couldn't go after before. And then is it fair to expect that these hybrid clients start small and then you guys can upsell the modules over time?
spk12: Yeah. Hey, Matt. Good evening. So by hybrid, I assume you mean being able to consume revenue and compliance management through our software as well as business services. And interestingly enough, part of our investment thesis with business services was really just primarily to go after new logos. But what we have seen, and we've signed a few deals with customers now where they didn't use Model N in the business for things like government pricing, as an example, Medicaid claims processing, and did not have the expertise in-house. And so they found business services to be very attractive. When we talked about that hybrid environment, you know, again, it really reflects the fact that we have such a broad set of offerings that we can tailor to a customer's specific needs and their business requirements and how they want to consume our offerings.
spk00: Got it. That's helpful. And then appreciating that the business services help expand your TAM in part due to those kind of pre-revenue biotechs. we're starting to see some slowdown in biotech funding, you know, relative to some of the 2021 peak levels. Just curious if that poses any risk to the business services segment or if, you know, that tail is still long enough that whether there's a slowdown in funding or not, it's kind of immaterial relative to the broader opportunity in front of you. Thanks.
spk12: Yeah, it's more the latter. We've actually been seeing our pipeline accelerate in business services, and I think it's more reflective of how big and untapped and underserved that market is. So while certain areas may be slowing down a bit, there's still a broad part of that market that continues to invest. And Amilex, who I cited in the script, is a great example of a customer that we actually started working with during the FDA approval process. And then they signed and became a customer when they got their stamp of approval and started selling.
spk03: Next question comes from Joe Mears with Truist.
spk06: Please go ahead.
spk09: Hey, guys. Thanks for taking the question. At Rainmaker, you talked about some new products, including advanced testing services and Engage. We'd love to hear about any early customer feedback there, if those products are available for customers yet. Thank you.
spk12: Yeah, the advanced testing services are products that we have available and are leveraging in the marketplace today. And just about every single one of our customers uses those services to help deal with the stringent internal audit constraints around consuming a new cloud release. So, the advanced testing services has actually been a major enabler of some of our larger SaaS transitions. And Engage is a product that's on the roadmap, and it's a product that's really designed to help users better navigate the system, consume new features and functions more quickly, and it's something that we'll be rolling out next year.
spk09: Helpful, thanks. And then just as a follow-up, one of the trends you talked about at Rainmaker affecting high tech was the ongoing supply constraints. Just wondering if you could talk about which of your products help here, Have you seen any increased demand in this space because of what's been going on in the supply chain? Thanks so much.
spk12: Yeah, certainly our channel data management product helps high-tech customers with supply chain constraints because they want to make sure that they have the right incentives in place to push their scarce products through the most profitable, most reliable channels. So we have seen an uptick in the high-tech business, as I said. And channel data management is one of those products that solves a very top of mind issue for these companies.
spk03: Thanks again. Thanks, Jeff.
spk06: Next question. Chad Bennett with Craig Howell. Please go ahead.
spk10: Great. Thanks for taking my questions. John, maybe first one for you. Just can you give us a little bit of insight of the dynamic on RPO between CRPO and non-current And just kind of that delta there, whether in terms of deal ramps or deal structure and maybe what to expect as much as you care to share in upcoming quarters with respect to CRPO?
spk02: Yeah, sure. No, happy to. You know, we actually saw solid growth on both metrics, but obviously the total RPO number at 40% year over year, outshined a bit. And what I would say there is that we actually look at both. The current RPO gives us a great visibility in terms of our next 12 months revenue, particularly on the subscription side of things. So that's an important metric for us. And then on the total RPO side, that really goes to the overall health of the business and what we're seeing from a booking standpoint. One of the big drivers behind that is the SaaS transition deals. Those tend to be larger deals. and longer term in nature, it's not uncommon for those to be, you know, three to five years in length. And so those contribute quite a bit to the total number and then roll into the current number each year.
spk10: So should we see that delta, John, kind of compress and, you know, maybe where the CRPO accelerates a bit, especially as you kind of get to the second half of the year and the next year and maybe the DO ramps are more of a tailwind?
spk02: Yeah, I would say maybe over time you might see those numbers converge, those growth rates converge a little bit. You know, the way I guess I would think about the total RPO number and the long-term RPO is each year that, in effect, backfills your current RPO. So as you consume current RPO over the next 12 months, you've already got bookings in place that will fill in for that number that you consume each year. And so that's why I think both are important, the total RPO number and that long-term gives us a pretty good runway of visibility for the next several years.
spk10: Got it. Then maybe one follow-up. I think it was Jason, but maybe it was John. Just in terms of you talked about net expansion, and I think you said you're seeing more net expansion from kind of cross-sell, up-sell, or add-on products today. from a materiality standpoint versus, you know, kind of like for like migration dollars. Can you just talk about kind of how significant that's been over the last few quarters and maybe, you know, any type of improvement, I guess, maybe that's the right or wrong word in terms of cross-sell, up-sell efficiency into the go-to-market? Thanks. Thanks.
spk12: Yeah, Chad, I'll take that. So as I've said on past calls, SaaS transitions have been a great catalyst to get back in front of our customers and retell the Model N story. And even more importantly, plan out not just the SaaS transition, but what are the other things that customers can consume from Model N to drive value. And I think what's become a really encouraging trend out of those discussions is we have a number of products that we're not contributing in a material way to our bookings. 18 months ago that now are making up a significant part of our bookings in addition to SaaS transitions. And so when I look back over the last couple of quarters, it's things like state price transparency, it's things like our global products, global price management, global tenders, valid data, business services, some of the enhanced support offerings that we're able to bundle in with a SaaS contract. Like I said, it's been a great trend in the business that these fast transitions have been a catalyst to get back in front of customers. And as you're probably thinking that just rattled off that list, we have a lot of different things that we can sell to our customers. And that doesn't even include just moving current Model N footprint into other divisions. So there's a nice dispersion across all of those different opportunities we have as we look at what we're selling into the base.
spk10: Great. Thank you. Nice job on the quarter. Thanks, Chad.
spk06: Next question, Joe Vrewink with Baird. Please go ahead.
spk03: Yeah. Hi, everyone.
spk07: I'll maybe stay on the same topic, the portion of your bookings that come from non-test transition deals. Can you just maybe elaborate on how that impacts the financial model maybe differently than Model N has been seeing. I think we've been in a period of time where you've had success signing really big deals, but multi-year deals, some deals that have ramps are what you just described, maybe more prone to near-term activation. So it kind of creates this more near-term certainty on top of the longer-term tailwinds with the transitions.
spk03: So, Joe, could you restate the question?
spk07: Yeah, basically, I guess the gist of it is if you get a year of bookings where it's not so heavily reliant on SaaS transitions to the earlier points about if the other products and the upsell cross-sell that seems to be driving good activity here, how that might influence your I guess, execution and your more near-term growth profile if these are the types of products that might be prone to quicker activation ultimately.
spk12: Yeah, okay. That's really helpful, Joe. Thank you. Yeah, so I guess there's a couple of things that I would say there. And some of this goes back to when I started at the company. You know, we have a multi-million dollar, you know, $70 million bogey that we've been going after with SaaS transitions. And we've talked about the white space in our customer base. And this was even pre some of the new products that we have being, you know, three to four expat. And so the fact that we have that unique opportunity, but weren't staffed up from a go-to-market or a selling motion perspective to capitalize on it, I thought was an issue. And so what we're seeing now with some of these results is that multi-year effort in bifurcating our sales force around hunters and farmers, getting more high value products for those teams to sell. And as you point out, certainly when you get a customer to the cloud, being able to turn on a new incremental product, both in terms of the effort to sell it and implement it, goes down pretty dramatically. So, yeah, I would characterize some of that nice uplift that we're getting from cross-sell, up-sell as just a byproduct of how we organize things on the market and what happens when you transform into a cloud company.
spk07: Okay, okay, that's great. It would seem that your services team is running at a really high utilization level. Are you perhaps running up against maybe the ability to hire influencing how you think about growth going forward? And can you maybe just address the broader kind of there's huge demand for these very specifically trained service professionals for the life sciences space? how you kind of go about competing or how your recruitment plans have been going?
spk12: Yeah, that's also a good question, Joe. So, you know, we knew last year coming into this year was going to be a pivotal year in SAS transitions. And so there were two things that we did ahead of that. One, we did hire a bit ahead in our services organization to make sure that we have the right capacity to deliver, you know, what is a very robust backlog of business. And then the second thing we did is we cultivated, I would characterize it as three or four SI partnerships that could see the path forward to pretty significant Model N practices during this ask transition period, and then some of the additional work that we were just talking about, cross-sell and up-sell. And it's really been that combination of our own hiring and the great team we have, as well as some very strong partnerships with some of the SIs in the field that's allowed us to fulfill that work. I will say this, we probably lean a little more on SIs as some of these bigger customers and bigger projects work their way through the system. But I do think we've got good flexibility with the SI network to deliver.
spk07: That's great. Thank you very much. Thanks, Joe. Thanks, Joe.
spk06: Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from Brian Peterson with Raymond James. Please go ahead.
spk08: Hey, gentlemen. Thanks for taking the question. So first, just kind of cross-sell. There's obviously some new products that are driving bookings. I'd be curious – For a lot of these products, is it more greenfield than what you guys have historically done? I know a lot of that's been transitioned. And thus, are we not going to see maintenance declines as it relates to some of these deals? I want to make sure I understand what's in place for your customers as you kind of broaden that SaaS adoption across the portfolio.
spk12: Yeah, the maintenance phenomenon is really related to SaaS transitions of core footprint that is out there on-premise. things like state price transparency, some of our global products, business services, of course, and then some of the enhanced services tied to SAS. There is no legacy product that customers are moving from. So it is greenfield, I guess, to use your terms, and doesn't have any maintenance that's deprecating along with it.
spk08: Got it. Thanks, Jason. And maybe just on the services side, I know you guys made some announcements out at Rainmaker You know, as we think about like a fully transitioned model over the cloud, what's the right way to think about services intensity with that? Because obviously the domain expertise is there. I'm just, you know, maybe there isn't as much implementation. I'm just curious how to think about kind of a long-term subscription versus services mix. Thanks, guys.
spk12: Yeah, we certainly haven't guided on kind of that long-term model, but I can tell you anecdotally what we've seen in some of our new customers that we've signed and implemented. The services that patch rate is more like $0.75 to $1.25 of subscription, and it just kind of depends on the customer's requirements, complexity, and footprint, but much more in line of what you would see in a native SaaS company.
spk03: Thank you. Thanks.
spk06: Next question comes from Matt Vansley with BTIG. Please go ahead.
spk01: Yeah, thanks for taking the question. I wanted to dig in a little bit in terms of what you're seeing from potential price increases or other sort of inflation hedging type of mechanisms that you might have, both in your contracts and as you negotiate SaaS contracts or expansion deals, kind of what levers you're trying to pull and what has been the customer reaction thus far?
spk02: Yeah, this is John. I'll start in on that. So, you know, I guess from a more broader perspective in inflation in general, this hasn't been a huge factor for us to date on the expense side of things. Where we might see a little bit of impact is really just on the employee costs, although I would argue we've been in an inflationary market for tech talent for several years now, so if not decades. So I think that's been kind of par for the course. In terms of some of the things that we're doing from a customer standpoint, we have been able to push through price increases, and we're actually getting good traction on renewals in that regard. So that's been a positive. And so, net-net, I would say that inflation has not been a concern, and, in fact, we've been able to benefit from it a little bit.
spk12: And I would add on to what John said. We also did recently nudge up our professional services rate card as well.
spk01: Okay, very helpful. And then, you know, I guess exiting Rainmaker, how would you judge it in terms of, you know, new business development and overall, you know, customer relationship management there? And, you know, kind of within that, what has been the feedback of the 3.0 strategy? the long-term strategy looks like there, anything coming out of there that would be really helpful?
spk12: Yeah, so on the 3.0 strategy, I would say, you know, this is something that we've been road testing with a number of our large customers over the last year. And in fact, some of the strategy work we did around this involved direct customer feedback. I think there's been a level of excitement with customers, particularly given that most of our customers view us as a very strategic partner in some of these key areas. And so to have a broader portfolio of services that they can consume from one trusted advisor seems to resonate well with them. As I mentioned in one of the earlier questions that was asked of me as well, small customers, big customers, business services, and that value prop has resonated well, probably more surgically at the upper end of the market, but as a broad-based solution at the mid-market. So there's been good validation of this strategy, and as I said, it was a collaborative effort with some of our largest customers. I personally was very pleased with the turnout at Rainmaker this year. I believe the final tally we published was over 700 non-Model N attendees. And particularly given how dynamic the market is right now around some of these regulatory changes, that was a big topic of discussion. And both new prospects as well as existing customers, the sessions that were by industry leaders like King and Spalding on the State price transparency side of things, those were very well attended and our sessions that we did on our own products to address those issues were oversubscribed. So I was very, very pleased with attendance and some of the engagement on these key topics. And I was a virtual show, so I guess that's a trade off. Maybe you get a little bit better attendance, but harder to touch people. But we are starting to get back on the road again. Our customers are getting back in the office. And we've got a busy summer ahead of us getting out and visiting people that we haven't seen in potentially a couple years.
spk01: All right, great. Thank you.
spk03: Thanks, Matt.
spk06: We have time for one more question. Joe Goodwin with JMP Securities. Please go ahead.
spk11: Great. Thanks, guys, for taking the question. And congrats on the quarter. Just wondering, what was the percentage of ramp deals in the quarter?
spk12: Percent of RAM fields was actually lower than it was pre-pandemic. So, you know, as we've talked about, Joe, we use that as a tool to keep things moving, both on sales and services during the pandemic. And, you know, we've said that we're not really using them as much or if at all. And so it was lower than pre-pandemic levels and something that I would say is a footnote in the Model M pandemic stories at this point.
spk11: On current RPO, just the sequential decline from 1Q, anything to note there, John, or any comment?
spk02: No. I mean, the only thing that would be, you know, playing into that is just the timing of contracts and how they're rolling through the model, particularly the maintenance. And so, maintenance, we see a lot of renewals around our fiscal year end and around the calendar year end. And then that bleeds off over the course of the year.
spk03: And so that's probably the biggest factor. Thank you. Absolutely.
spk06: Thank you. I will now turn the call over to Jason Blessings, CEO, for concluding remarks.
spk12: Thank you, operator. I wanted to end today's call on a personal note. I just celebrated my four-year anniversary at Model N. and just wanted to share a few things. First of all, this is by far the best job I've ever had. Our corporate culture and our core values are absolutely second to none, and I have worked at some amazing companies over my 25-plus years in enterprise software. Second, it has been an absolutely amazing experience to work with companies that are our customers, companies that are truly improving the quality of human life something we've certainly seen play out in spades over the last couple of years. And then finally, it's been really rewarding to take my 15-plus years of working at native SaaS companies and apply that expertise and work side by side with an amazing team here at Model M to drive the business model transition that we're now coming out the back side of. And it has just been incredibly rewarding to build such a great, durable company that's still got many great years ahead of it. Again, thank you everyone for attending our call and have a great night.
spk06: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
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