Model N Inc (NYSE:MODN)
Q1 2016 Earnings Conference Call
February 8, 2016 5:00 PM ET
Sheila Ennis - Investor Relations
Zack Rinat - Founder, Chairman and Chief Executive Officer
Mark Tisdel - Senior Vice President and Chief Financial Officer
Edward Sander - Upcoming Chief Executive Officer
Nandan Amladi - Deutsche Bank
Brian Peterson - Raymond James
Matt VanVliet - Stifel Nicolaus
Sterling Auty - JPMorgan
Peter Lowry - JMP Securities LLC.
Greetings and welcome to the Model N First Quarter Fiscal 2016 Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Ms. Sheila Ennis. Thank you. You may begin.
Good afternoon. Welcome to the earnings results call for Model N’s first quarter fiscal 2016 which ended on December 31, 2015. With me today are Zack Rinat, Chairman and Chief Executive Officer; Chief Financial Officer, Mark Tisdel; and incoming CEO, Edward Sander.
Our press release was issued after the close of market and is posted on our website where this call is being simultaneously webcast. The primary purpose of today’s call is to provide you information regarding our first quarter 2016 performance, in addition to our financial outlook for the second quarter and full-year fiscal 2016.
Commentary made on this call may include forward-looking statements. These statements are subject to risks, uncertainties and assumptions. Please refer to the press release and the risk factors in documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Results Report on Form 10-Q for information on risks and uncertainties. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements.
In addition, during today’s call, we will discuss non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of Model N’s performance, should be considered in addition to, not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with the comparable GAAP results in our press release.
At times in response to your questions, we may offer incremental metric to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that this additional detail maybe one-time in nature and we may or may not provide an update in the future on these metrics. I encourage you to visit our Investor Relations website at investor.modeln.com to access our first quarter fiscal 2016 press release, periodic SEC reports, and the webcast replay of this call.
Finally, unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2016.
With that, let me turn the call over to Zack.
Good afternoon and thank you for joining us today. The prepared remarks section today will be divided into three sections. I will start with a summary of Q1 fiscal year 2016. Mark Tisdel, our CFO will follow me with the financial details. I will finish by discussing the appointment of Edward Sander to Chief Executive Officer, and my appointment to Executive Chairman.
Model N executed well in Q1 fiscal year 2016, again exceeding our guidance on both the top and bottom line. We made excellent progress on executing our strategy to concurrently grow our revenues and to transform our business to SaaS and maintenance revenue.
Model N grew Q1 fiscal year 2016 total revenue 11% and SaaS and maintenance revenue 60% versus Q1 fiscal year 2015. In particular, I’m very excited by the fact that Model N reported 81% of total revenues in SaaS and maintenance revenue. This is a 25% point increase over the 56% of total revenue we reported a year ago.
Q1 marks a strong start to fiscal year 2016. It reinforced in September 2015, we announced the Revvy Revenue Management Application Suite. The Revvy Revenue Management Application Suite is the combination of 16 years of developing, deploying, and scaling enterprise-grade Revenue Management Application for the world’s most innovative companies.
Over the last four years, we have leveraged the proven experience to architect from the ground-up Revvy Revenue Management to be both sales force native and enterprise grade. All Revvy applications are built on a single, scalable, and a high-performance architecture that can meet the demand of the largest and most complex enterprises.
The lynchpin of Revvy Revenue Management is Revvy configure, price and quote or Revvy CPQ. Revvy CPQ enables salespeople to maximize the revenues and minimize nonproductive time, which is particularly a big challenge for those that are self-complex configure product.
Revvy CPQ was specifically built to leverage and expose core elements of products from ERP system in sales force environment, including native into interoperability with SAP Variant Configurator, which is used by thousands of companies as the source of proof for manufacture product. And Revvy CPQ was designed with performance in mind using a technology called Virtual Tabulation, which is proven to deliver lightening fast responses to the most complex and demanding configuration and rules combination.
In Q1 fiscal year 2016, we experienced tremendous success with Revvy CPQ. A global diversified technology company with over $20 billion in annual revenue selected Revvy CPQ as the standard Global CPQ system across their business unit. This global leader was looking to replace a sophisticated home grown CPQ solution with a sales force native enterprise grade CPQ solution.
The enterprise grade CPQ had to have the robustness and interoperability with SAP and SAP volume configurator and performance of scalability to accommodate complex configuration in many thousands of users. After reviewing value CPQ proposals, the company selected two finally. The company engaged one of the prominent global system integrators to conduct a proof-of-value or POV, where they act both finally to deliver decent business scenario actually walking in product.
The customer and the system integrator created each scenario based on the productability to deliver the scenario out of the books. In Q1 fiscal year 2016, Model N was selected as this company’s global standard for CPQ and together we embarked on the global implementation with the first delivery in this quarter. In addition, Model N was selected by this customer for Revenue Management Cloud implementation in the United States.
Another key win in this quarter was this Corning, a longtime Model N customer. Corning extended the Revenue Management Cloud by selecting Revvy CPQ for global deployment, as well after successful proof-of-concept. These two wins with global leaders are strong testaments to our vision of unifying CRM and Revenue Management. We call it CRM squared because of the exponential results achieved from multiplying CRM and RM.
Revvy CPQ and the Revvy Revenue Management Application Suite provide our customers with the platform to turn this vision of CRM Square into reality. Furthermore, Revvy CPQ and Revvy Revenue Management enable Model N to expand its thumb into the broader manufacturing vertical and to deliver value as the bridge between CRM and the strategic financial and manufacturing applications and data in the ERP system that enterprise companies rely upon.
In the last quarter, we signed several customers that will be using Revenue Management Cloud. Our momentum around delivering Revenue Management as a Service continue with the addition of Ipsen Biopharmaceuticals. Ipsen Bio, a $1.5 billion global leader in specialty healthcare solution selected Model N Revenue Management as a Service solution. The solution includes both the Commercial and the Regulatory Application Suite. Leveraging Revenue Management as a Service, Ipsen will be able to report government pricing, process Medicaid claims, commercial rebates, and end-to-end revenue management processes.
In addition, Ipsen will be able to develop and maintain its full portfolio of gross to net model and gain visibility into how the gross to net will be impacted from changes in pricing, rebating, discounting, market share, or corporate problems. Model N selected because of our Revenue Management as a Service the best of our product line and our proven deployment methodology.
In Q1 fiscal year 2016, Model N closed acquisition of Channel Insight, a leader in Channel Data Management. Channel Insight enable Model N to accelerate our strategy for an end-to-end Revenue Management Application Suite for both direct and indirect channel.
The combination of Model N Channel Management and Channel Insight CDM provides companies with a leading enterprise grade end-to-end solution to manage the global channel revenues. I’m happy to report that the acquisition has gone extremely well. Model N signed two new customers within the first few weeks after the close.
Sierra Wireless, a multinational wireless communication equipment designer and manufacturer headquartered in British Columbia selected the Model N Channel Management Solution. Sierra Wireless will be able to provide channel transparency to the company and sales leadership to gain full understanding of their channel business and to make timely decisions to drive channel revenues.
C&K Components, a leader in interface and switch technology, as well as smart card and high reliability connector product located in Newton, Massachusetts selected Model N Channel Management as well. C&K component is the parts catalogue of tens of thousands of components. With Model N Channel Management, C&K will be able to get extremely upward visibility into their business.
I’m encouraged by the result of Q1 fiscal year 2016, and our increased confident for fiscal year 2016 and beyond.
Let me turn the call to Mark to discuss our financial results and guidance for the remaining of the year. Mark?
Thank you, Zack. First, I would like to give an update on the progress of our stated goals of both increasing total revenues and increasing recurring revenue as a percentage of total revenue, as we shared on our Investor and Analyst Day Call on November 9.
As Zack noted in Q1, our recurring revenue as a percentage of total revenue was 81%, a substantial increase from 56% in Q1 2015, and up from 67% of total revenues in Q4 of 2015. Also, total revenues were $24.5 million and a 11% year-over-year increase with a 2,500 basis point increase in recurring revenue as a percentage of total revenue. We feel, we have made significant progress in both areas and are very focused on sustaining strong execution. We will discuss Q2 and fiscal year 2016 guidance in a minute.
Total revenues for the first quarter were $24.5 million above our guidance range of $24 million to $24.2 million. This includes a deferred revenue haircut of approximately 200,000 related to the acquisition of Channel Insight, which was completed within the quarter. This compares to a $22.1 million in total revenue in a year-ago period.
Within total revenues, license and implementation revenues were $4.6 million and SaaS and maintenance revenues were $19.9 million for the quarter. We expect license and implementation revenues to remain relatively flat in Q1 for the remainder of the fiscal year. The mix of our revenue in Q1 was 81% SaaS and maintenance versus 19% license and implementation, a significant improvement from 56% SaaS and maintenance and 44% license and implementation in Q1 of fiscal 2015.
As we stated in the past, we are transitioning to SaaS and maintenance model, and the 81% achieved this quarter is by far the highest percentage of SaaS and maintenance revenue in company history. This also represents a 60% increase year-over-year in SaaS and maintenance revenue dollar.
Before I move on to profit and loss items, I want to remind you that my commentary will be focused on non-GAAP results. A reconciliation of non-GAAP to GAAP results is provided with our earnings press release issued earlier today.
Gross profit for the first quarter was $12.7 million compared to $13 million in the first quarter of fiscal 2015. Similar to recent quarters, gross profit in this quarter included the impact of roughly $600,000 from the amortization of capitalized software that began upon the launch of our Revvy CPQ product.
Overall gross margin in the quarter was 52% compared to 59% in Q1 of last year. As we have discussed on previous calls and at the Investor and Analyst Day, the transition to the Saas model will impact gross margins in the short-term, and we expect our overall gross margin to show further improvement as we migrate to a higher percentage of revenue in SaaS and maintenance revenue.
As we have stated in the past, we do expect some quarter-to-quarter variability in gross margins depending on the mix of revenues and other factors. Research and development expense was $4.9 million compared to $4.1 million in the first quarter of fiscal 2015. We are continuing to invest in our products. The Q1 results did include the capitalization of expenditures related to Revvy products on the order of $500,000.
Sales and marketing expense was $7 million compared to $6.1 million in the year ago period. This increase was driven by our continued investment in sales and marketing personnel and marketing program spend.
G&A expense was $5.2 million compared to $4.5 million in Q1 of fiscal 2015. The year-over-year increase was attributable to the timing of the audit fees and to the timing of expenses related to our annual company meeting.
Operating loss for the period was $4.4 million compared to a loss of $1.7 million in Q1 of last year and better than our guidance of an operating loss of $4.6 million to $4.8 million.
Net loss in the first quarter was $4.4 million compared to a net loss of $1.7 million in the first quarter of fiscal 2015. We produced a net loss per share of $0.16 based on the share count of 26.8 million shares compared to a net loss per share of $0.07 based on the share count of 25.3 million shares in the first quarter of last year. This was better than our guidance of a net loss of $0.17 to $0.18 per share.
Adjusted EBITDA for the first quarter was negative $3.2 million compared to negative $800,000 in the year ago period. We ended the first quarter with $70.4 million of cash and cash equivalent, down from $91 million at the end of fourth quarter, The decrease in cash was due in part to the Channel Insight transaction we’ve disclosed early in the quarter, as well as the delay of some customer payments at December 31, which is a normal process of our customers retaining cash until early January.
The company’s annual bonus was also paid in Q1. We believe we are a target for the $72 million in cash balance at September 30, 2016 as we guided in our last call. At the end of the first quarter, our accounts receivable balance was $22.2 million and our total deferred revenue was $27.7 million.
As mentioned previously, we believe our accounts receivable and deferred revenue balances are not a meaningful indicator of the business activity during any particular quarter, as the timing of our invoicing under our contract impacts these items, because we do not bill our customers up front for total contract fees.
For the first quarter, cash flow used by operations was $7.3 million, which after adding CapEx of approximately $400,000 and capitalized software of $500,000 produces a negative free cash flow of $8.2 million. This compares to cash used by operations of $3.5 million in the first quarter of last year, which after adding approximately $700,000 of CapEx and capitalized software of $600,000 produced a negative free cash flow of $4.8 million.
Similar to prior commentary in regards to our receivable and deferred revenue balances, there can be some quarter-to-quarter variability in our cash flow, as it is impacted by the timing of invoicing under our contracts. As we stated above, many of our customers deferred their year-end payments in the early January, and we believe we are on track for a stated goal of $70 million to $72 million for our fiscal year.
Moving on let me now outline our guidance for the second quarter of fiscal 2016, as well as our expectations for the full fiscal year 2016. For our second quarter ending March 31, we expect total revenues to range from $25.4 million to $25.6 million, non-GAAP loss from operations in the range of $6.8 million to $7 million. This would lead to a non-GAAP net loss per share in the range of $0.25 to $0.26 based on a weighted average share count of 27.2 million shares.
For the full fiscal year 2016, we expect total revenues to range from $106.5 million to a $107.5 million, or growth of 14% to 15% for the year as a whole. This is an improvement from our prior guidance of $106 million to a $107 million.
Non-GAAP loss from operations in the range of $17.2 million to $17.5 million, an improvement compared to our prior guidance of $17.3 million to $17.8 million. Non-GAAP net loss per share in the range of $0.63, $0.65 based on a weighted average share count of 27.2 million shares, an improvement compared to our prior guidance of $0.64 to $0.66.
The annual recurring revenue is now expected to range from $36 million to $37 million, up from our $34 million to $35 million, as previously guided, an increase of 85% to 90% over fiscal year 2015. Please note we define annualized recurring revenue as a monthly recurring revenue at September 2016, multiplied by 12.
In summary, we continue to make progress against our stated goals of both increasing overall revenue and increasing recurring revenue. We have seen a 60% year-over-year increase in SaaS and maintenance revenue dollars versus Q1 2015 and 81% of our total revenues were SaaS and maintenance revenues.
The Revenue Management market remains large and untapped, and we believe we are well-positioned to execute on this tremendous opportunity.
I will now turn the call back to Zack.
Over the last two years, we executed well on our strategy to transform Model N into a cloud company grow revenue and transform our business model to SaaS and maintenance revenue. As such, we transformed every aspect of our business.
First, we changed the way we engaged with our customers. Second, we transformed the way we develop and deliver products, as well as the way our customers consume this product. Last year we announced Revenue Management as a Service, which is a strategy and a solution to move our installed base from the current on-premise deployment to Software as a Service.
Third, we released several new multi-tenant SaaS applications such as Revvy sales, the first CRM solution for semiconductor and component industry, and Revvy Revenue Management, the first sales force native enterprise grade, revenue management application suite.
Over the last several quarters, the results of our hard work have become more evident in our financial results. Both our fiscal year results and Q1 fiscal year 2016 results are strong testament to our success, more than 81% of our revenue is now a SaaS and recurring revenue. More recently with evidence mounting that we are on the right track I have been working closely with the Board to identify the right person to bring additional executive leadership to the company to accelerate our very positive trajectory.
We were looking for a CEO with deep enterprise software expertise, demonstrated leadership in driving product in go-to-market strategies, and a leader with proven track record of scaling global businesses. I’m very pleased to announce that effective February 22, Edward Sander will join Model N as Chief Executive Officer. I will assume and you all as an Executive Chairman focusing on Board development, strategy, and supporting Ed, as the new CEO of Model N.
I’m excited to Ed as a CEO, as he brings a wealth of experience and key skills to our executive team. The Board and I have worked diligently to select an outstanding executive from a list of very competent candidate to take Model N to the next level. Ed joins Model N with deep knowledge in enterprise software having held key roles in global companies, such as NICE Systems, IntraLinks, and SAP.
At SAP, Ed was a key member of the global marketing team that expanded SAP’s back office ERP portfolio into the front office driving a threefold growth of the CRM business. At IntraLinks, Ed led product strategy that resulted in new vertical expansion and the creation of new horizontal applications enabling IntraLinks to accelerate their IPO.
During these five years tenure at NICE System optimized business, Ed held two executive positions. As Chief Product Officer, Ed drove the product transformation strategy that yielded three years of double-digit growth. And his most recent role as the General Manager of its largest financial crime solution division, Ed delivered a year-to-year booking growth of over 30%.
The Board and I believe that his experience in each of this global leadership roles will be an asset to Model N. We are confident that under his leadership Model N will also reach exciting new height in the years ahead.
When we started Model N in December 1999, we dream of building the next great software company focused on our built core values with particular dedication to customer success. We have been focused on our mission to work closely with our customers and to lead the market for Revenue Management. We are fortunate to have earned the trust of some of the world’s leading brand to jointly innovate and deliver exceptional business results.
Today, Model N solutions are widely used on a global basis by tens of thousands of users who execute quotes, price contract, process rebate, and execute many other functions that comprise of the broader end-to-end Revenue Management lifecycle.
We are excited about the market opportunity for Revenue Management in fiscal year 2016 and beyond. It is a very exciting time in our journey, as we have strong evidence that the businesses are ready to leverage revenue management as a competitive advantage and our strategy to capitalize on this opportunity is working.
We are in an era of major technological changes with the emergence of cloud computing, SaaS, social, mobile, and Big Data to name a few. These technologies create both challenges and opportunities for businesses, and in particular for the way companies are connecting, interacting, and engaging with their customers.
At the same time enterprises and CEOs know they must create shareholder value by delivering financial results that are centered on top line revenue growth. These two mandates are converting quickly to create an opportunity for revenue management to become the catalyst to transform customer relationship into improve financial result by enabling enterprises to maximize revenue and revenue growth.
Our strategy in fiscal year 2016 is to invest to continue our leadership position in life sciences and high-tech; capitalize on the unification of CRM and Revenue Management, while completing the transformation of the company’s business model to recurring revenue. Model N had a successful fiscal year 2015 and strong start to fiscal year 2016.
I believe that this is the right time for new leadership that will execute our strategy, scale the business significantly, and propel Model N to the next level. I remain fairly committed to Model N’s long-term success and look forward to working with Ed as the new leader of Model N.
With this, I would like turn this to Ed to say few words before open these for questions and answers for Mark and myself.
Thanks, Zack. I’m thrilled to be joining Model N as the CEO. It’s clear that Model N has dedicated to helping its customers succeed in their businesses. This core cooperate compass along with its incredibly powerful software has put Model N in the pole position as a must-have partner for any company seeking to maximize its growth potential.
Having worked in enterprise software for my entire career with companies of all shapes and sizes around the world, I understand the power and synergy found when you move beyond being just a vendor to a true strategic partner with your customers.
Model N has earned that coverage spot with its customers, and I believe this positions us well for fantastic growth in the years to come. Bringing the power of CRM square to the market as a bold and visionary undertaking that takes a unique combination of entrepreneurial zeal and laser focus for flawless execution. I’ve seen this DNA and passion in the Model N team, and I’m excited to lead them on their journey to see this deal vision realized. I think we can’t wait to get started.
Thank you, Ed. It’s great to have you on Board. And Mark and I will take now questions.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Nandan Amladi with Deutsche Bank. Please state your question.
Thank you. Good afternoon. Thanks for taking my question. Zack, you talked a lot about CPQ in your script. As it applies to you specifically, how big do you see this market and your ability to address it? And I ask this because Salesforce recently acquired SteelBrick, and there seems to be a lot of press about what is happening in the world of CPQ?
Yes, absolutely. We focus on the revenue management market. And we believe that CPQ is a critical component of the Revenue Management market. Furthermore, when we spoke about the convergence of CRM and Revenue Management, we see there’s a typical phenomena moving forward. And we believe that as companies focus right now on the number one strategic priority of most companies, which is the growth, and we’re going to see an era where CRM and revenue management need to come together in a very short kind of no period this time.
And it’s not about integrating them, it’s about much bolder concept of unification, and really enabling our customers to do a digital transformation of the business. And furthermore we believe that that’s the time where you will need also to unify the data that is center around the customer and that’s data that is coming from the ERP from the CRM for Revenue Management, Channel Data, and also a syndicated market data that exist in a certain industry.
So we believe that we’re in a prime position to be the catalyst to enable this division of what we call CRM square, it’s about the exponential of the results. CPQ is a critical component of that, and we’re very pleased with the solution that we have. And as the two deals that we announced this quarter indicate, I believe that division that we have is very much correlated with the enterprise kind of no enterprises space. And I believe that there’s a whole new set of a customers in the market space that really manage between the ERP and a CRM, where Revenue Management can make a big kind of a big difference.
Thank you. And a follow-up question for Mark perhaps. On the profitability roadmap, you raised your profitability guidance for the remainder of this year. In the market today as you know, there seems to be a lot more pressure on companies with profitability that’s still several quarters away. So are there any levers that you can sort of adjust to maybe achieve profitability a little bit sooner?
Yes. So, Nandan, it’s a good question. First of all as you know, we exited Q1 and we’ve raised guidance for the year is part of that that’s because of the strong visibility we have on the top line for fiscal year 2016, and we discussed that at the Analyst Day and again we reiterate, the model would allows us to achieve that very strong visibility into the remaining three quarters of the fiscal year.
So we feel very good about where we’re positioned, as we move through the year, and we will certainly keep our eye on profitability. But we’re very focused on moving towards that, as we enter fiscal year 2017.
All right. Thank you. That’s all.
Our next question comes from Brian Peterson with Raymond James. Please state your question.
Yes. Hi, Mark. Quick question. I wanted to hit on the line one revenue, sorry, I’m trying to quote here. But I know you guys came in a little bit lower than what we were modeling this quarter, obviously that was more than offset by the line through contribution, which is a great news. But I’m just trying to understand, was there anything as far as that transition from line one to line two, did that happen a little bit quicker than you expected in the first quarter?
Sure, Brian, thank you for the question. So, first of all I want to reiterate what we spoke about at the Analyst Call, which was, we had $7 million in contingent revenue related to go-live last year. And in Q4 alone, we had four such project, which contributed to our Q4 revenue.
As a reference point, we didn’t have any of those deals, so these are perpetual licenses that went live in Q1. Primarily as we talked about as a reference point the majority of our transactions were SaaS based last year. So as we look out for the remainder of this fiscal year, we expect our revenue per line one to remain relatively flat to Q1 for the remainder of fiscal year 2016.
Got it. Okay, thanks for the color on that. And just maybe a broader perspective Zack on what you guys are seeing out there in terms of sales cycles, obviously, it’s been a kind of tough day in the market for the last couple of days. Has that had any change or any impact, I’d say overall from a macro perspective on your business, where it looks like – looking at when deals are closing opportunities out there et cetera? I’m just curious you guys are seeing what we are seeing? Thank you.
So we have not seen any change in the market. We see the demand is actually a strong demand for a cloud for Revenue Management. And they received that the division that we have for CRM square and the unification of revenue management and CRM is very much in line with where the market is going and with activities.
Closer to kind of to remember that when you look at our two core markets in life sciences and in high-tech, this market we’re relatively active. The U.S. government just released the final ruling for the AMP Rule, which is a regulatory adherence to pharmaceutical companies, and it will require sister companies to think about the systems and the next generation.
There is a variety of activities right now on the M&A that really drive them to drive their the business and to look at optionality and how they’re going to start to the system. And the solution that we have and the fact that we have right now is full line of the cloud and SaaS program, a very in line with number one strategic priorities of this company. So we do not see any change in demand so far in the market.
Okay, good to hear. Thanks, Zack.
Our next question comes from Tom Roderick with Stifel. Please state your question.
Yes, hi, Matt VanVliet on for Tom this afternoon. Thanks for taking my question. First, I wanted to see, if we have any update on some of the large pharma customers that are already looking at Revenue Management in the cloud and some of the Revvy products, just sort of where those are from some of your marquee customers in terms of getting up to speed and live production? And then in addition to that sort of what the up-sell trends have been at the established customers with the cloud management product?
Yes, absolutely. So we see the color for the cloud and SaaS, and it moves very, very rapidly from a concept to exploration to really becoming to be a main stream. When you look at the revenue management, the cloud product that we started to release about a year plus ago, we have right now – actually a vast majority of the customers on this product, so let’s give you an indication about how fast the transformation has happened.
Also, when you look at the products that we put to the market as part of a Revvy Revenue Management, the two deals that we announced today, where it’s basically CPQ and it’s a multi-tenant SaaS platform, or you think about the fact that we have right now 9 of the top 20 pharmaceutical companies managing every price that they have right now on the globe on a multi-tenant SaaS platform is something that nobody could predict two years ago that is happening. But through innovations through working with the customers and bringing it to the market right now, it’s a reality.
And we didn’t have time to speak about it in earnings call. But we see a very different cycle to implementation and actually to closing deals, but there is a lot more rapid and much better. I want to speak about kind of one customer that I cannot name one of the top five pharmaceutical company. And we went live with them in the previous quarter in 108 countries as they kind of – if they directly, from the go go. And now they’re managing every price that they have on the globe in this multi-tenant solutions.
And furthermore, this particular project was selected to receive the CIO award for this implementation is considered to be one of the best implementation that they has in the last year and kind of now beyond that. And when we look at this from a different angle, which is also a customer satisfaction, you can notice that across the board, customers that are on the cloud on the SaaS product are the happiest customers that we have. And we think it’s a trend that is going to move kind of move forward. And I think you can see it also in our financials, and I think it’s going to be even kind of stronger in the future.
And then following up on those implementations, can you remind us just in general what the services piece is related to getting those customers live and in production, maybe just relative to sort of a legacy on-prem license deals that you were showing previously?
Sure. So, matt, I think the response to that is it really depends on the implementation. So as we spoke in a lot around perpetual licenses we have some customers, which take that across the enterprise, we have some customers that do it by business unit over time. And so the – what we call the attach rate, but perpetual license has varied over time. I would say from the SaaS side that’s also true. But if you do an apples-to-apples comparison to an implementation, we have found that the SaaS implementations are faster and less expensive than if they had done it versus the perpetual licenses.
So, basically, if you look at what we have done since we moved to the cloud and the SaaS, we simplified the kind of the implementation the kind of the implementation. As Mark mentioned, we put strong methodologies for that kind of software implementation. And furthermore, we’ve partnered in a more intensive way that we have been in the past in order to fuel the ecosystem around the company.
This particular project that I just mentioned of the pharmaceutical company that went live in 108 countries at the same time. We’re doing this with one of the prominent system integrators in the world same thing with this diverse technology company that selected CPQ. So that also give us an opportunity to accelerate the go-to-market and the services through better partnership and still kind of grow the business at the same time.
Great. Thank you.
Our next question comes from Sterling Auty with JPMorgan. Please state your question.
Thanks. Hi, guys. Zack, one of the things that has been consistent over the last several years is that, at least in our discussions with some of your biggest customers, has been your participation or kind of the – your role in closing some of the largest transactions in the company. So what I’m kind of curious about is, with you moving into Executive Chairman, are you still going to be involved in some of the larger customers as part of the sales process, or over what timeframe are you phasing into just the focus areas that you mentioned as Executive Chairman?
Yes. Thank you. So, when you look at my role, my role is not just the Chairman, but I’m an Executive Chairman, which means that I’m still an employee of the company. I have an office, and I kind of go to work to support the mission of the company and support Ed in kind of now in the management position. And I – and Ed look at this as a partnership to carry the company forward.
Needless to say, Ed is the CEO of the company. And as such the buck stops there and he has full responsibility to kind of to drive the business. But my passion and my commitment and my involvement in the company is not changing. And I look at these as a way to take the company to the next level. And, yes, I’m going to be involved in deals and in the customer and supporting the executive team as they take the company to the next chapter in its evolution.
Sounds good. Thank you.
Our final question comes from Peter Lowry with JMP Securities. Please state your question.
Great, thank you. Have you seen an evolution of customers understanding of CPQ?
Yes, we have seen that and I – we really believe that that’s something that is working very well and for kind of for Model N. You have to remember Peter that Model N has been doing quoting and pricing and to the reconfiguration of almost 15 years. As you know, we have companies that have thousands of people both direct and in the channels that everyday they configure the quote and the price kind of the price and kind of no solution.
So we understand this beyond the kind of not obvious software, the CPQ, really understand that in order really to unify as CRM and revenue management that CPQ is the linchpin. But there is farther more than this. So if you think about the combination of the global price management, CPQ contract lifecycle management and the rebate and the strong intelligence, all of this capturing basically the process, but also the information that enable you to translate what you do from information into insight into action and into kind of into revenues. We think that this vision is very much in line with where the world is kind of is going.
When you look at this some of the deals that we announced and other that we didn’t announce is very much in line with how the thought leaders are getting them. And we believe that it’s just a matter of time, where the world is going to realize that is going to be absolutely the single most important thing that they need to do in order to drive revenue and revenue growth. So we are very excited about it.
Okay, great. Thank you.
Ladies and gentlemen, that does conclude today’s conference. Thank you for your participation. You may disconnect your lines at this time.
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