Model N, Inc.

Good afternoon and welcome to Model N Fourth Quarter 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Carolyn Bass, Investor Relations. Please go ahead.

Good afternoon. Welcome to Model N's fourth quarter and fiscal 2023 year-end earnings call. This is Carolyn Bass, Investor Relations for Model N. With me on the call today are Jason Blessing, Model N's President and Chief Executive Officer, and John Eder, 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 fourth quarter performance and to offer a financial outlook for our first quarter and fiscal year ending September 30, 2024. The 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 court 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 10Q and 10K 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 issued today, which is available on our website. I encourage you to visit our investor relations website at investor.modeln.com to access our fourth quarter and fiscal 2023 year-end press release, periodic SEC reports, a webcast replay of this call, and a supplemental investor relations deck for Q4 which includes some additional disclosures that John will review later on in the call. 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 fourth quarter results exceeded guidance for total revenue, subscription revenue, and professional services revenue. We were in line with our quarterly guidance on adjusted EBITDA. Overall, Q4 was a strong quarter and demonstrates our commitment to driving profitable growth. Our Q4 SaaS metrics were also strong, driven by SaaS ARR, which grew by 20% year over year, while SaaS net value retention was 118%. Our strong SaaS ARR growth and improving profitability are proof points that we are building a durable SaaS business. 2023 was a pivotal year in our business model transition as we continued to successfully move our on-premise customers to the cloud. We closed out the year with approximately 85% of our life sciences customers either live or in the process of moving to the cloud, up from 70% a year ago. As you know, we have announced end of life for our on-premise solutions on December 31st, 2023. I do expect that we will have a few customers that will need one or two more quarters to sequence their SaaS transitions into their IT roadmap, but I continue to believe that we will convert substantially all of our customers. This is a truly remarkable accomplishment by our team, given the complexity and mission-critical nature of our applications. To help put this accomplishment into context, I thought it would be worth a quick recap of the business model transformation that we have driven. Over the last three years, both our annual SAS revenue and adjusted EBITDA have doubled. This clearly demonstrates the leverage in our model and our philosophy of delivering profitable growth to shareholders. We have built a great SAS franchise that provides mission-critical products to our customers. This is a great foundation for future profitable growth as we collaborate with customers to build new products and add new customers to the Model M family. Next, I'd like to share some business highlights from the quarter. We delivered strong results that were powered by our key growth drivers of SaaS transition, selling back to the customer base, and signing new logos. So let me share some examples. First, SaaS transition. As I've said on past calls, we wanted to take our time with the final SAS transition to make sure that we ended up with mutually favorable agreements with customers. This approach is paying off. And in Q4, we signed five new SAS transitions. First, we signed a SAS transition with Bausch Health Companies, a global diversified pharmaceutical company whose mission is to improve people's lives with their healthcare products. This deal builds upon a 20-year relationship between our two companies and sets the stage for the next decade. Moving to our cloud will allow Bausch to more efficiently take advantage of innovations and performance improvements while also staying compliant with the evolving regulatory landscape. We also kicked off the fast transition with another long-time customer who is one of the largest producers of generic drugs in the world and employs over 20,000 people across more than 30 companies. This customer will move their nine-country footprint to the cloud and will eventually deploy 20 additional countries over the next five years. During the quarter, we also assigned two additional long-time large pharma customers to fast transition. Like other customers that have transitioned, these two customers are looking forward to quicker access to innovation, improved performance, more predictable costs, and, of course, easier access to new regulatory enhancements. We also continue to see SaaS transitions pay dividends by setting up additional customer base sales as we build out multi-year roadmaps. During Q4, we saw this pattern repeat at one of our major customers where they will start with a fast transition as well as add new products, including Validata, Advanced Membership Management, and Engage. This example is particularly encouraging because Advanced Membership Management and Engage are new products that we've released over the last couple of years. Validata is not a new product, but it is one of our more popular products that sets up future upsells like 340B Vigilance. This example is a clear testament to our ability to sell new products to our SaaS customers. Turning to business services, during the quarter, we signed several customer extensions and a new logo, Haleo. Halion decided to move from their current provider to take advantage of improved service levels around processing chargebacks, membership administration, and Medicaid processing. Halion was seeking a partner with an organization that could provide improved client interaction and processing using industry best practices and technology. We had a good quarter in high tech, and this segment continues to show steady improvement. In Q4, Cirrus Logic, an innovator in low-power mixed signal technology for top mobile and consumer applications, selected Model N as their revenue cloud platform of choice. Cirrus Logic has been leveraging some of our on-premise solutions and will now move all of their processing to our cloud. This move will allow them to streamline their processes, make it easier to collaborate with their partners, and consume new releases. Also in Q4, Model N is selected as the vendor of choice for deal management at Allegro Microsystems, a global manufacturer of sensor-integrated circuits used by the automotive and industrial markets. Allegro has a goal of reducing technology platforms while automating inefficient manual processes with channel partners. Deal management will replace multiple homegrown systems and help Allegro better manage global prices automate quoting, and discount controls. Turning to professional services, our team exceeded expectations with another strong quarter. The results of our professional services organization symbolize the strong demand for a mission-critical solution as companies seek to drive top and bottom line improvements. Our professional services team continues to do a terrific job of getting new customers live on time and on budget. One project in particular that I'd like to call out is J&J and their successful Cloud Go Live to support their pharma business. J&J is a long-standing Model N customer, and this project required the team to ensure success in two key areas. J&J's complex integrations with their downstream IT infrastructure, as well as a custom reporting system. We were able to meet the needs of the customer, and we were also able to pull the go-live forward by one full month to accommodate J&J's quarter-end requirements. As we focus on the future, we continue to build new products in collaboration with our customers. Two recent examples that launched in Q4 are channel collaboration and Medicaid automated invoice retrieval. Channel collaboration is a new portal that allows our high-tech customers to collaborate in real time with training partners around sales and incentive data. Historically, this business process was done manually in email and was fought with errors. Our channel collaboration portal will allow customers to more accurately pay their partners, which would drive efficiencies in channel costs and improve overall channel partner satisfaction. Also during Q4, we started to deploy Medicaid automated invoice retrieval with our design partners, including one of our top five global pharma customers. This new product is a robotic process automation-enabled service that automates acquisition and ingestion of quarterly Medicaid invoices, which has historically been done manually and is error-prone. Manufacturers using this offering can expect significant productivity and cost improvements each year. We expect to make this product generally available this quarter. In closing, I am extremely pleased with another year of driving profitable growth. Our fiscal 2023 results reflect the strong collective efforts of model owners around the world. As I outlined at the start of the call, Our successful cloud transition is clearly showcased by the leverage we've demonstrated in our model in a very short period of time. Both our annual SaaS revenue and adjusted EBITDA have doubled in just three years. Looking ahead, our objective is to continue to deliver value to our customers while driving growth and improving profitability. With that, I'll turn the call over to John to discuss our Q4 financial results and offer our outlook for Q1 and fiscal 2024. John?