Model N, Inc.

Greetings and welcome to Model N's first quarter fiscal 2023 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. It is now my pleasure to introduce your host, Carolyn Bess, Investor Relations. Thank you. You may begin.

Good afternoon. Welcome to Model N's first quarter and fiscal 2023 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 first quarter of fiscal 2023 performance and offer an outlook for our second quarter and fiscal year ending September 30, 2023. The comments 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 statements may differ materially. Please refer to our 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 the non-GAAP metrics to the nearest GAAP metrics are included in the earnings release we issued today, which is available on our website. I encourage you to visit our investor relations website at investor.modeln.com to access our first quarter fiscal 2023 press release, periodic SEC reports, and the webcast replay of the call today. Finally, unless otherwise stated, all financial comparisons in this call will be made to our fiscal year 2022 results. And with that, let me turn the call over to Jason.

Thank you, Carolyn, and welcome to our call today. I am pleased to report that our first quarter results beat expectations on total revenue and subscription revenue, and professional services came in at the high end of our guidance range. I am very proud of our team and the strong quarter that we posted to start the year. As we look ahead, we remain committed to driving profitable growth throughout the year. I'd like to highlight two important Q1 metrics that stand out to me. First, our SaaS ARR grew by 36% year over year. In addition, our remaining performance obligations, or RPO, which reflects the strong visibility into our business, grew 32% year over year. In short, we had a good start to our fiscal year. Now I'd like to share some of the business highlights from the quarter. Success in Q1 was driven by a healthy contribution from all areas of the business. We signed new logos, closed a meaningful new SaaS transition, saw numerous customer base expansions, and we also enjoyed strong renewals across the board. Starting with SaaS transitions, during the quarter, we signed a top 10 global pharma company and a longtime Model N customer to begin their cloud journey with us. Our SAS platform will allow them to take advantage of Model N innovations more quickly and cost effectively, as well as give them access to the latest regulatory updates. This win is just the latest example of Model N's industry standard revenue management and compliance platform, helping global pharma companies to operate more efficiently. I am personally sitting on the steering committee for this project, and look forward to partnering with this customer to achieve their Model N objectives. In Life Sciences, we also posted wins with several new logos. In Q1, we signed Lantheus as a customer. Lantheus is an established leader in the development, manufacture, and commercialization of AI-powered diagnostic and therapeutic products. Lanthea sought a best-of-breed solution to address their revenue optimization and compliance challenges, which had grown in scale and complexity due to acquisitions and new product launches. This win includes U.S. government and commercial contracting as well as state price transparency management. This suite of products is critical to managing the increasingly complex regulatory environment while also helping our customers maintain commercial and regulatory compliance. Model M was also selected because of our deep experience in global pricing and our successful track record of integrating with SAP. During Q1, we also signed Kate Farms as a new logo. Kate Farms offers products that help support the nutritional needs of people with a variety of critical health issues. Kate Farms required a comprehensive solution to help their flexible approach to contracting and pricing as well as a system to help with compliance, membership management, and tracking chargebacks and rebates. They selected Model N based on our industry-leading solutions, our domain expertise, and track record for quality project delivery. This win also shows our ability to expand to a close adjacency to our core pharma market. During the quarter, we also enjoyed strong expansions in our life sciences customer base. One such example is at AbbVie, a top 10 global pharma company. Following the mega merger of pharma giants AbbVie and Allergan, AbbVie expanded their investment with us to fold Allergan into AbbVie's Model N platform. This is another great example of where Model N is once again being chosen as the standard for a top 10 global pharma company that is growing organically and through M&A. Turning to high tech, we continue to leverage our leadership position in the semiconductor industry by extending into other adjacent segments. Further, our land and expand strategy is paying dividends, and during Q1, we closed several upsell opportunities in high tech. One example is at Soladyne Technology, a global provider of flash drive technology that was spun out of Intel. At the time of the spinout, Soladyne selected Model N as one of their core business systems. After successfully going live on Revenue Cloud and data management, Soladyne has continued to expand their usage of Revenue Cloud and recently added global pricing and deal management modules. As you may recall, we signed Soladyne as a new customer just a year ago. And it's great to see this global company live on Model N and continuing to expand their usage. During the quarter, we also expanded our relationship with Enphase. Enphase is a technology company that develops and manufactures solar microinverters, battery energy storage, and EV charging stations. In Q1, Enphase expanded their Model N footprint by adding additional channel data management partners to support their ongoing growth. Enphase is also a great example of how our high-tech solutions can be leveraged in adjacent markets that involve complex technical components and distribution channels, similar to the semiconductor industry. Turning to professional services, our team had another very strong quarter to kick off the fiscal year. Professional services demand remains near an all-time high, and our backlog continues to be very robust. Following Model N's latest product release, we had several customers take this update during the quarter and successfully go live. This update includes a new payment management solution for high-tech companies, as well as improvements to our global price management application for pharmaceutical and med tech companies. A large cohort of our customers went live on this update during Q1, which once again proves out our core SAS value proposition of keeping our customers current and leveraging our latest innovation. Speaking of successful go-lives, we continue to do a terrific job of getting new customers live on time and on budget. The latest example of this is Moderna. As you know, Moderna is a leading pharmaceutical and biotechnology company that focuses on combating disease by leveraging its mRNA vaccine platform. As Moderna's business grew during the pandemic, they needed a solution to help them scale their revenue management processes. We started our journey with Moderna in EMEA with global price management and international reference pricing. which helps companies make more informed decisions on how to price and sequence product launches across countries. Moderna then added our global tender management product to more effectively distribute their products in EMEA. Then in Q1, Moderna turned to model and business services to support its US commercial operations. This is a great illustration of how we can land and expand and how our flexible delivery model allows us to tailor solutions based on how a customer wants to consume our revenue management products. During the quarter, we also released our Fall 2022 product update. This latest release demonstrates our commitment to continued investment in our industry-leading products and to deliver continuous innovation to our customers on our cloud platform. Highlights of this release include a new customer value dashboard that shows real-time savings and processing volumes in Model N. This is a great example of us delivering on our data and analytics vision. We also delivered enhanced features to help pharma companies better manage drugs coming off patent protection. We made several regulatory updates to support Medicaid changes and We also delivered a new analytics application to help better visualize deal profitability. Finally, earlier today, we issued our new 2023 State of Revenue Report. This marks our fifth annual report, which identifies pressing challenges and opportunities for pharmaceutical, medtech, and high-tech manufacturers. This report is based on the results of a survey of more than 300 C-suite executives directly responsible for revenue management. As organizations continue to navigate the current economic climate, the quality and reliability of technology solutions are more important than ever. The top three highlights from this year's report include supply chain disruption is the number one theme impacting revenue management for the second year in a row. Second, 70% of executives believe their industry is losing billions of dollars due to issues like inaccurate or ineffective pricing and quoting. And finally, 96% report that staffing and expertise issues negatively impact their revenue management processes. These insights help us understand how to empower our customers to create and bring their life-changing products to market. I encourage all of you to read the 2023 State of Revenue Report by downloading it from our website at modeln.com. Let me conclude by saying that I'm pleased with our continued execution in this environment, and I am proud of the strong SaaS ARR growth that we posted while also showing leverage on our bottom line. I would also like to thank our customers who continue to partner so closely with us And of course, these great results are a reflection of the great model enters around the world and their dedication to our DaraCore values and company culture. We kicked off the year with a solid Q1, and I am excited about the year ahead. With that, I will now turn the call over to John to discuss our Q1 financial results and provide guidance for Q2 and fiscal year 2023. John?