Model N, Inc.

Good afternoon and welcome to Model N's first quarter of fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. A confirmation tone will indicate your line in the question queue. If anyone should require operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded. With that, I would like to turn the call over to Carolyn Bass, Investor Relations. Please go ahead.

Good afternoon. Welcome to Model N's first quarter of fiscal 2024 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 Etterer, 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 performance and offer a financial outlook for our second quarter and fiscal year ending December 31, 2024. 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 form, PENQ, 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 or an 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 first quarter fiscal 2024 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 to our fiscal 2023 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 exceeded guidance for total revenue, subscription revenue, professional services revenue, and adjusted EBITDA. We also generated over $20 million in incremental cash flow from operations in Q1 versus the first quarter of last year. This metric is another proof point that demonstrates the overall health of our business and the progress we've made on our business model transformation. Our Q1 SaaS ARR grew by 16% year-over-year, while SaaS net value retention was 115%. As we have said on the last two calls, we face tough comparables this year in the first few quarters when compared to last year's record-setting SAS metrics. That said, we expect our SAS growth metrics to improve as we exit the year, and we are pleased with our start to 2024. Next, I'd like to share select business highlights from the quarter. I am encouraged by Q1 because we signed one of our last remaining large SaaS transitions, but more importantly, we saw meaningful contribution from our long-term growth drivers. The bookings mix included new logos and numerous customer-based deals, including transactions involving recently released products. I was also pleased to see a strong order from business services. In Q1, our new logo team posted a strong start to the year. In Life Sciences, I am pleased to announce a marquee win with the signing of Bayer Pharmaceuticals, a top 20 global pharma company that is currently going through its own transformation. Bayer's broad portfolio includes many world-famous products that have shaped their iconic brand. This was a competitive win and includes our full suite of cloud offerings, including all commercial, Bear sought a best-of-breed solution to address their revenue management challenges, which included many manual and outsourced processes. Additionally, Bear is looking to establish a robust platform to support multiple upcoming product launches. Model N will be instrumental in supporting these new launches while also delivering several operational improvements, resulting in a strong ROI when the system is fully deployed. In life sciences, we also continue to see solid growth within our customer base, led by new products that we're releasing. Novartis, a prominent Model N SaaS customer, recently implemented Model N Engage in support of their focus on operational excellence. Engage is Model N's innovative in-application guidance tool, specifically designed to help users navigate the system while also helping to enforce key operational and compliance controls. Engage also provides real-time analytics to customers and Model N to help identify where users are having challenges with system usability. This helps us to improve our user experience and empowers customers to streamline user procedures. The adoption of Engage at Novartis demonstrates this new product's ability to help companies be more successful with their Model N investments while also improving overall operational excellence. Also in Q1, Apellis Pharmaceutical selected Global Launch Excellence to augment their existing deployment of Model N's Global Pricing Management. Apellis is a global biopharmaceutical company that develops transformative medicines for people living with rare retinal and neurological diseases. Model N's Global Launch Excellence module will allow Apellis to create complex launch sequences by combining accurate price data volume forecasts, and optimization algorithms to ensure that their therapies efficiently reach the patient populations that need them most. Turning to business services, during the quarter we signed several customer expansions. One I'd like to highlight is at Moderna. Moderna expanded their business services consumption to handle their membership, contract administration, and rebates processing to support their growing business. Moderna is also a case study on how business services allows us to engage with an emerging pharmaceutical company and quickly provide fully outsourced revenue management to enable them to deliver their life-changing products to the world. Another terrific example of business services enabling a growth company is at United Therapeutics. United Therapeutics is an existing Model N customer and needed help dealing with the increasing complexity of state price transparency regulations. To address this need, this customer selected our newly released State Price Transparency Management Business Services offering. This solution will enable United Therapeutics to accelerate their path to compliance and to ensure that their future state price compliance needs will be properly managed, regardless of the changes in regulations. Moving on to SAS transitions, during the quarter, we signed one of our few remaining SAS transitions with Teva Pharmaceuticals. Teva is the global leader in generic drug manufacturing, supplying affordable medicines to nearly 200 million people across six continents every day. This deal extends the 20-plus year revenue management partnership between our two companies. Our SaaS platform will allow Teva to more easily take advantage of innovations and to operate more efficiently while maintaining compliance. Turning to high-tech, this segment continues to show green shoots and posted a strong Q1 that included customer expansions and two new logo wins. The first new logo is Taiwan Semiconductor, a multinational semiconductor design and manufacturer that also owns the world's first dedicated semiconductor foundry. Taiwan Semiconductor is planning to grow their business globally, especially through their distribution channel, but they are limited by a combination of manual and homegrown systems. They needed a platform to build a consistent global approach to pricing, quoting, and point-of-sale integration. After a thorough evaluation, Taiwan Semiconductor chose Model N's channel data management and revenue cloud to automate these key processes to support their future growth. We also signed another new logo in high-tech with a company that designs and manufactures power conversion, measurement, and control solutions that are used by a wide variety of industries. During our sales cycle, we worked with the customer to identify significant operational improvements using Model N that will result in efficiencies in pricing strategies and a meaningful reduction in revenue leakage. This customer also plans to use Model N as an enabler for future acquisitions given that Model N will allow them to quickly implement key channel incentive and pricing strategies into the newly acquired business. It is gratifying to see both of these new high-tech customers turn to Model N as a strategic partner to enable their growth strategies. Turning to professional services, our team exceeded expectations with another strong quarter. The results of our professional services organization symbolize the strong demand for our mission-critical solutions 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 that I'd like to call out is Genentech and their successful SaaS transition to support their pharma business. Genentech is the latest example of our team working closely with a longtime customer with a very complex configuration and successfully moving them to our cloud platform. This project also includes the implementation of our proprietary testing suite that helps pharma companies more easily maintain compliance with internal audit, while also being able to quickly adopt innovation and regulatory updates. Again, congratulations to Genentech and our services team for achieving this important milestone in our relationship. As we focus on future growth, we continue to build new products in collaboration with our customers. One recent example is price management for high tech, a new product that enables manufacturers to simultaneously manage price execution across direct and indirect channels globally. This new module is fully integrated with our deal management product and streamlines pricing updates to enable tight pricing control and real-time market execution of changes. Finally, earlier today, we issued our new 2024 State of Revenue Report. This marks our sixth annual report, which identifies the top 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. Three themes stand out to me in the 2024 report because they reflect the dynamic operating environment that has become the new normal, and each is something that Model N can help our customers address. The three themes are executives name process efficiency and cost savings as top priorities in this operating environment and are increasingly looking to advanced analytics and AI to achieve these priorities. For a second year in a row, supply chain disruption emerged as one of the top obstacles across all industries. And finally, pharmaceutical executives do not see the pace of regulatory change slowing down anytime soon. These insights help us better understand how to tailor our solutions to empower our customers to create and bring their life-changing products to the world. I encourage all of you to read the 2024 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, and I am proud of the leverage we're showing on our bottom line as we navigate the end of our business model transition. We are also posting tangible proof points that our long-term growth levers of new logos, customer expansion, and product innovation continue to mature and are materially contributing to our bookings. I'd also like to thank model owners around the world that continue to focus on customer success, our Darapora values, and driving profitable growth. Because of you, we kicked off the year with a solid Q1, and I am excited about the year ahead. With that, I'll turn the call over to John to discuss our Q1 financial results and offer our outlook for Q2 and fiscal 2024.