Q4 2020 Model N Inc Earnings Call
Greetings and welcome to model and fourth quarter and full year 2020 earnings conference call at this time all.
All participants are in listen only mode. A question answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to trend This conference over to your host.
One Lundberg Investor Relations. Please go ahead ma'am.
Good afternoon, and welcome to the earnings call for modeling fourth quarter and fiscal year 2020, which ended on September Thirtyth 2020.
This is Glenn Lauber lens director of Investor Relations and.
With me on the call today are Jason blessing online she.
Keep executive officer.
Well I think I got vice President of S.P.N. IR <unk>.
And Cathy Lewis Chief Accounting Officer.
Our earnings press release was issued after the close of market and is posted on our website.
The primary purpose of todays call is to provide you with information regarding our fourth quarter and fiscal year 2020 performance.
Our financial outlook for our first quarter.
Fiscal year 2021.
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 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 10-Q filed with the FCC.
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 release issued today, which is available on our website.
I encourage you to visit our Investor Relations website at Investor Dod model N. Dot com.
Access our fourth quarter fiscal year 2020 press release periodic.
Periodically does he see reports.
The webcast replay of this call.
Finally, unless otherwise stated.
All financial comparisons in this call will be to our fiscal year 2019 results.
With that let me turn the call over to Jason.
Thanks, Glenn and good afternoon, everyone.
Thank you for joining us today.
Q4 was another strong quarter for model N and punctuate, a strong end to our fiscal year.
I remember 2024, all of the challenges we faced around the world, but also because this was a year where model and continued to deliver profitable growth.
In our customer relationships and take care of our employees.
Today, I will provide you with insight into Q4, and our fiscal year 2020 results and give you an update on our business.
I will conclude my prepared remarks, with an update on fiscal 2021 guidance.
Our results for Q4 exceeded all key metrics that we shared in our last quarterly update and demonstrate that modeling continues to execute well in this uncertain environment.
Total revenue for the quarter was $41.5 million, an increase of over 13% from last year and subscription revenue was $29.7 million, an 8% increase over last year.
Our strong professional services revenue up $11.8 million highlights that are customers continued to prioritize their modeling projects due to the top and bottom line performance our products enable.
Our results also continued to confirm that our focused strategy implemented over two years ago is working even in these difficult times.
Our success this quarter was powered by contributions from all of our go to market teams.
We added four new logos, we had several expansions in our customer base and we continue to sign new Hsas transitions.
These results show that our teams and customers are settling into remote selling and delivery.
Also of note when the pandemic started in the spring. We said we would use flexible deal structures to drive sales velocity and this approach has had the intended positive impact.
During Q4, we closed the highest quarterly deal volume in our company's history.
The tradeoff is these contracts contribute a lower amount of revenue in the near term, but we believe the company benefit significantly by continuing to close deals.
This approach keeps our team engaged shows strong partnership with our customers and create upside in our book of business. When these contracts renew at more favorable economic terms.
Our professional services team had another great quarter and a fantastic year.
This team has worked closely with our customers to ensure that project stayed on track as we worked remotely which produced strong results not only in the quarter, but throughout the year.
The team's ability to complete projects on time and on budget has been remarkable and this year. We celebrated a record number of go lives of which more than 90% were delivered on time.
Much of the success is a result of our cloud delivery model, which significantly reduces the time to consume new innovation, and our new automation tools, which drastically reduce the time and risk in testing and validation.
This continuous improvement to our delivery model further reduces implementation timelines, thereby increasing time to value for our customers.
Turning to our markets. We saw success in both life Sciences and high Tech.
Our life Sciences team added three new logos, including our Joe which adds to our growing list of Med Tech customers.
We were also selected at working on Merck's spin off of their women's health trusted legacy brands and bio similar businesses.
Merck is a long time model N customer and now we will provide working on with our full suite of revenue cloud products.
On the farm up one of the largest human protein product manufacturers in the World also joined the model N family.
The pharma is a global company committed to patient care and medical innovation and has recently been in the news because of their plasma blood therapies that are being used to come back COVID-19.
Given the growth in their business the company needed a solution that could scale globally, while providing commercial and regulatory compliance.
After considering several options the company chose model N. Because they believed that we could meet their needs today and support their plans for the future.
On our Q2 call earlier this year, we reported that the generics division of Mallinckrodt, a multibillion dollar global pharmaceutical company went live on revenue cloud in six months a record at the time.
I'm very happy to announce that in Q4, there branded division went live in just five months and new SaaS transition record for us.
This go live demonstrates not only the high quality work of our professional services team, but also our commitment to driving rapid time to value for our customers.
I am also happy to announce that flu vaccine manufacture Securus went live in Q4.
When we sign this deal earlier this year I talked about the importance of their modeling project progressing quickly to support their growing business during a busy flu season.
Utilizing our new express methodology, our professional services team was able to meet the customers tight timeline and to get them live in order to meet their business demands. This fall.
Model N. Now provides this customer with a fully integrated solution that automates pastas and reduces overpayments on rebates and charge backs.
We also had several of our early SaaS transition customers successfully take their seasonal updates this quarter.
Gilliam took their first update and implemented several new features that give them improved contracting capabilities enhance chargebacks improve script validation and other general improvements.
British medical equipment manufacturer Smith and nephew also took their first seasonal update since their staffs transition and took advantage of several new contracting enhancements as well as improved regulatory compliance capabilities.
We also signed new SaaS transitions in Q4, most notably Johnson and Johnson started their journey to Hsas by kicking off a project to move its model and infrastructure in Japan to our cloud.
To achieve their tight timeframe and business objectives, Johnson and Johnson determined that our solutions provided the most accurate reporting and compliance.
And that modeling SaaS platform offered better performance and reliability.
As SaaS transition momentum picked up in 2020, we also saw increased interest from our top 10 pharma customers to move to our class.
We are actively working with several of these customers to plan their move over the next two years.
I am personally involved with our account teams in many of these deals as we work collaboratively with our customers to ensure that we find the best path forward to mutual success.
Remote work is also proving to be a catalyst for hsas transitions as customers look for solutions that allow them to adapt to this new normal while enabling their teams to remain productive competitive and compliant in a global marketplace.
Turning to high Tech this vertical continues to improve since being impacted in the spring by the global pandemic.
In Q4, we added a new logo executed several customer expansion deals and celebrated multiple go lives.
Hi Tech pipeline does remain below pre pandemic levels as deals have pushed out but the pipeline has continued to recover throughout the year.
In Q4, we signed Korea, as a new customer as they prepare to spin out their semiconductor business into a new company.
[noise] reason innovative leading supplier to multiple market segments, including renewable energy and other growth industries. They.
They determined that model and is one of three essential projects that they will fund during the spin out to support the company's new operations.
Pre currently relies on partners to manage their complex channel using manual homegrown solutions, which results in significant revenue leakage.
We believe that model n's pricing quoting and channel management applications will allow cree to modernize their infrastructure reduce revenue leakage and support their future growth.
We also had several successful go lives in high tech in the quarter, including an important one at A.M.D., which expanded to the full suite of model N products and integrated our solutions, but their front and back office systems.
Andy is simplifying their sales process and positioning themselves for future growth by improving their data quality and harmonizing processes across business units with model N.
Now I'd like to elaborate on our financial results and provide fiscal year 2021 guidance.
Our results for Q4 and fiscal year 2020 exceeded the guidance that we shared with you on our last call and demonstrate our ability to deliver profitable growth.
Total revenue for Q4 grew 13% to $41.5 million and subscription revenue grew $29.7 million, an increase of 8% from a year ago.
New subscription revenue expanded to over $19 million, an increase of just over 20% from last year.
Professional services revenue was $11.8 million.
Turning to profitability.
Non-GAAP gross profit for Q4 was $26.1 million or 63% of total revenue.
Non-GAAP gross margin for subscription revenue was 74%.
Non-GAAP operating profit for the quarter was $6.8 million.
Non-GAAP net income in Q4 was $5.1 million.
We produced a non-GAAP net income per share of 14 cents, which was ahead of our guidance of seven to nine cents.
Adjusted EBITDA for Q4 was $7 million reps.
Representing a margin of 17%.
Turning to our full fiscal year 2020 results total revenue was $161.1 million and subscription revenue was $116.2 million.
For the full year non-GAAP gross margin was 63%.
Non-GAAP income from operations for fiscal year, 2020 grew to $20.6 million compared to an operating income of 11.8 million in fiscal year 2019.
Non-GAAP net income for fiscal year, 2020 was $17 million, a significant increase from $8.1 million in the prior year.
Non-GAAP net income per share for fiscal year 2020 was 48 cents up from 24 cents in the prior year.
Adjusted EBITDA for the year was $21.4 million compared to a profit of $13.1 million in fiscal year 2019.
Moving onto the balance sheet, we ended our fiscal year with $200.5 million of cash and cash equivalents.
Our cash balance reflects our healthy free cash flow, a $14 million and the successful convertible debt financing completed in Q3.
I'd now like to provide you with guidance on our fiscal year 2021.
Our initial financial outlook for the year considers several important factors.
First in line with our guidance philosophy over the past couple of years, our outlook is based on a high degree of visibility yet.
It also contemplates our pipeline, which has continued to grow despite the ongoing challenging macro environment.
We also expect continued volatility to persist during 2021, which is likely to continue to cause some deal cycles to elongate.
Our guidance also factors in the impact of fiscal year 2020 customer friendly deal structures, which we expect to continue to utilize in 2021.
For the first quarter of our fiscal year, we expect total revenue to be in the range of $40.2 million to $40.6 million.
We expect subscription revenue to be in the range of $29.4 million to $29.8 million.
Non-GAAP income from operations is expected to be in the range of $4 million to $4.4 million and non-GAAP income per share in the range of five to eight cents based on a fully diluted share count of approximately 37.5 million shares.
Adjusted EBITDA is expected to be in the range of $4.1 million to $4.5 million.
For the full fiscal year 2021, we expect total revenue in the range of $170 million to $172 million.
We expect subscription revenue in the range of $122 million to $124 million.
Turning to profitability, we expect non-GAAP income from operations in the range of $17.6 million to $19.6 million and non-GAAP income per share in the range of 27 to 35 cents based on a fully diluted share count of approximately 39 million shares.
Adjusted EBITDA is expected to be in the range of $18 million to $20 million.
Before turning the call back to the operator for questions I want to give you. Some final thoughts on our initial outlook for 2021.
I'm very pleased with the progress that we've made since I joined model in over two years ago and how the team has performed and is truly unique environment.
As I said at the start of the call we have multiple proof points that our strategy is working.
We're making progress in both the life Sciences, and high Tech verticals, adding new logos and expanding within our customer base.
And our professional services team is doing a fantastic job delivering on large projects, including SAS transitions, which drives future growth.
I'm very encouraged by the activity that I see and the conversations that I've had with our customers. However, there does remain some uncertainty in the macro environment.
That said, we will continue to invest and we will grow through these times and I continue to be excited about our long term future.
Thank you for joining todays call now I'll turn the call over to the operator for questions operator.
At this time, we'll be conducting a question answer session.
I would like to ask a question. Please press star one on your telephone keypad a confirmation somewhat indicate your line is in the question queue. You May press starts you. If you would like true love your questions from the queue for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star key one moment, while we poll for questions.
And.
Our first question comes from the line of Chad Bennett with Craig Hallum. We proceed with your question.
Great. Thanks, Thanks for taking my questions nice job to a strong a year end, Jason and crew.
Thanks Jed.
So just on on it you know, Jason and when you're talking about which which is obviously we've been hearing a lot of in software World. Just you know kind of a deal ramps structures and I think you were even doing these you know somewhat from the get go pre cobot.
You know is there any way to.
You know quantify kind of the impact in the outlook from those deal structures and maybe how you're thinking about just independently the SAS business growth wise next year relative to the previous expectations and just you know what what what are the puts and takes since I think you.
I've been doing this deal structure is for a lot for a while.
You know those deals that X.
Actually were new for their second year next year. If that's the case that that would have lifted I assume just any commentary would be great. There.
Yeah, that's a fantastic question, Chad and a great place to start so as you point out you know we started doing deal ramps when I got to the company roughly a two two and a half years ago and you know as we fast forward to where we sit today.
Deal ramps did have our largest impact on on how we guided for this year and I want to give you a little bit more color on that.
Pre co that we were ramping roughly a third of our deals.
And a lot of it honestly was on the new logos side.
And you know post Cove entered during the co that era now that number is closer to 50% and as I said in my prepared remarks, you know with our best deal volume in company history. In Q4, you know that is definitely a tactic that is resonating with with customers.
I'd also like to provide you just a little bit more color on the 2021 impact the topline impact is seven figures and and so it you know it is baked into our guidance, but we do think that deal ramps are going to continue to be a away that we take.
Take deals off the street and.
Create long term value, which is ultimately why we're here.
And then also you know to your question about when do some of these contracts start to renew our.
Yeah, we have seen some of the early deal ramps that we did revenue at full value and our SAS gross renewals continue to be high Ninetys. That's what gives us confidence in not in doing deal ramps, but as those deals have renewed they renewed at full value customers feel good about the solution.
That they're getting and so we'll continue to have a natural tailwind over the next couple of years.
From some of the deal ramping that we're doing to them during the cobot era.
Got it no that's very helpful from a color standpoint, and then just it seems like you know the momentum behind SAS conversions continues despite the environment, we're in and and I think you indicated you know of the top 10 pharma you're working on a number of deals there.
Personally.
Are you as.
Kinda confident in SaaS conversion activity. It's maybe you were you know early in the you know maybe pre Pam pandemic is a way to ask it and and kind of the momentum that you guys are seeing there has anything kind of changed your view.
No I would say in fact everyday that goes by I get more comfortable around SaaS transitions and I'll I'll share a little more color there as well you think about the the last year year and a half we have demonstrated that we can consistently move customers to hsas do it on time on that budget with a high degree of qual.
City customers who've moved to our SaaS offering are enjoying the benefit of of rapidly consuming new innovation. They also talk about better system performance better stability and when you combine that with remote work is the new normal certainly for the the foreseeable future.
There's a number of proof points, there that had been enough to really get the attention of top 10 top 15 customers.
And then there is a number of them engage with us in detailed planning for transitions over the next 12 to 18 months.
Got it.
Thanks, Nice job again.
Thanks Jed.
Our next question comes from the line of Terry Tillman. That's true you May proceed with your question.
Yeah, Hey, Jason Thanks for taking my questions and appreciate all the perspective in detail, particularly around the though that these ramp deals. One question I had about his JNJ, maybe you could talk a little bit more about kind of the size and scope of this transition and I think you remark that Japan will be the first area, but.
How much impact will there be to subscription revenue and that's why 21 from JNJ and then I had a couple of quick follow up.
Yes, so the impact on on our revenue from J. and J. in 2021 is contemplated in the current guidance and we're working very closely with the executives at J. and J. on a a broader program to get them fully current and in our cloud over the next couple of years.
They had some some specific requirements in Japan to get their instance, there the products that they use their upgraded and so it just made business sense for us to start there that's why Japan first.
And that's the first step in what I think is going to be a 12 to 18 month program to get that encouraged they last upgraded a few years ago. So they are on track to do an upgrade anyway and our community. We're communicating to all of our top 10 top 15 customers that this round of.
Of upgrades needs to be a move to the cloud.
Great and maybe just as we look into why 20, when you give us the total subscription revenue, but how do we think about maintenance and then the second part of the question is given the nature of some of these flexible to your deal terms, maybe is our P.O. kind of increasingly more relevant and could you share with us the RPL. Thank you.
Yeah, I'll answer the maintenance number and then I'll ask Kathy to comment on our PEO. So the guidance that we would give this year on on maintenance is its about a third of our recurring mix or at least we exited Q4 with it or about a third a little over and we continue that we continue to believe that.
Maintenance stream will perform.
As we've guided in the past of declining you know low to or excuse me mid to high single digits and that could bump up over 10% in quarters, where we may have a large SaaS transition that.
That occurs but we generally view maintenance.
Going down faster as a good thing because it indicates a.
Traction on the on the SaaS transition side, but that that guidance of roughly a third declining mid to high single digits is how you should think about it from a modeling perspective, and then Kathy would you like to comment on our PEO, absolutely hi, so that all our PEO at the end of our fiscal year is roughly 165 million.
And the current portion of that is 87 million.
And as we discussed on previous calls and as Jason mentioned, our appeal will continue to be impacted by the deal structures that were contemplating.
[noise] alright, thank you.
Thanks Terry.
Our next question comes from the line of Matt Vanvliet BTI GI proceed with your question.
Yes, hi, Thanks for taking my question, maybe just a little clarification first on or the ramped impact the ramp deal impact on the 21 guidance you mentioned, it's a roughly seven figure impact, but just curious if that's relative to the now.
50% in there as an incremental amount to about the third that you mentioned or if that's all of the 50%. That's that's creating that seven figure had when there.
Yes. It assumes all of the 50% that we saw over the last couple of quarters and it assumes.
That will continue to ramp deals at a similar rate I don't have that it goes much higher but at a similar rate in the first half of the year, which you know we will have a little bit of additional impact on top line.
Great. Thanks, and then I guess also thinking about what are the conversations with with SAS transitions are progressing and maybe.
Maybe on some of those prospective customers.
Well those continue to be sort of a.
Very piecemeal or an almost kind of a land and expand element or some other discussions a little more holistic and undertaking some bigger projects potentially.
Yeah, It's a great question, Matt and it varies by account some customers are really just looking to get current and and modernize their infrastructure and take advantage of the SaaS delivery model, but.
But we have definitely seen or other customers that are approaching the SaaS true SaaS transitions as more of a transformational.
Effort inside of their companies and that can range from rolling out model and more broadly or to other divisions and I'm personally involved in one of our big SaaS transitions right now what we're talking about doing that can be everything from that to just simply a adopting new features new modules.
That weve released that the customers not consumed yet.
Mhm, and then lastly, and as we think about kind of what's been driving some of these new deal signings or more recently, obviously, we're all hopeful that a kind of a global rollout of a vaccine will be coming soon but I guess, what what's been the biggest driver for customers.
Buying new modules, you know are they looking towards that type of event.
Is there anything in particular within the portfolio, that's that's bad and much higher demand and maybe Conversely, anything that's that's been sort of trailing or less by the side or the very current environment that you're hopeful we'll start to pick back up.
Yes, it's a mix of things and it varies a little bit across the different verticals on life Sciences as we've talked about you know with Securus signed earlier this year, our Joe who we sign this quarter on the pharma, who we sign this quarter. You know these are all companies that are benefiting.
From a we're seeing demand go up from Covance and modernizing their business infrastructure. So you know there is some benefit from that we also last year and I think it's going to continue into this year has seen a lot of M&A.
Announced in life Sciences, and we generally benefit from that as well because the spun out companies will often select model N because it's what they're familiar with.
Got to.
B the infrastructure for the New company and I would say this combination of remote work and a fluid Ah regulatory environment continues to just drive customers to do SaaS transitions and get a current you don't the high Tech side as I've talked about the last couple of quarters and this theme persisted into this quarter, we're really.
Focused on growth companies that have innovative products that themselves are selling into growth end markets and so Korea is a new logo is a great example of that.
MD, which I think everyone considers a gross.
Gross bellwether is another company, we continue to spend a lot of time and have a lot of success with so on the high Tech side, though it is more focused on growth companies market leaders and those who are really trying to strengthen their top and bottom line performance in a in a difficult environment.
Alright, great. Thank you for taking my questions.
Thanks, Matt.
Our next question comes from the line of Brian Macdonald with Needham <unk> Co. you May proceed with your question.
Yes, good evening, Jason Thanks for taking my question as we look at the outlook, obviously, we've gone through a top top line impacts, but as we look sort of further down to the bottom line little bit of margin compression being assumed in the guidance right. Now can you talk about the areas in which you're investing incrementally into fit into the next fiscal year.
And what how you think about sort of the balance of growth and profitability.
As you're sort of seeing this impact us from from the ramping deal structure. Thanks.
Yeah. Thanks, Brian So theres a couple of points I'd make here first of all a ramping of deals does have a bit of an impact on gross margins and you're seeing some of that.
In the in the guidance because we still have to provide ADW us environments for these customers are kicking off projects and others that you know there is a base cost there and then depending on storage and transaction requirements that those.
Those deals can the cost of delivering those deals in the short term can be a little high as we're ramping revenue so thats a little bit of color on the gross margin side of things and.
And then a little color more broadly speaking on investment because I think this is a really important part of our story when the pandemic started we said that we would continue to surgically invest in areas that we think drive long term value and given this viewpoint, we've continued to top grade and selectively invest in sales.
We've built out a life sciences, new logo team, which didn't exist 12 months ago I'm very excited about the progress of that team I would say right now our high Tech team is in terms of sales is appropriately sized.
But on the life Sciences customer sales team I do see some opportunity to selectively invest there, particularly with the growing pipeline of SaaS transition and expansion deals in our customer base.
And then the final areas, we continue to invest in our product team on the heels of announcing a new chief product officer, particularly in the areas of bolstering some of our leadership capabilities in our product organization, we've been investing in engineering capabilities and then also in our cloud operations is that part of our business.
It really takes off.
Excellent and then as a follow up it was great to see the new partnership you announced a channel impact recently, just wondering sort of the strategic rationale around that partnership and how you think that can help perhaps get that pipeline in the high tech vertical back to pre pandemic level, so that that quicker. Thanks.
Yes, I'm glad you asked about channel impact in that partner so one of the things that partnership so.
One of the things that we see that's very comment on the high tech side of things, particularly when we're doing transformational projects is companies need help redesigning their pricing structure and the channel incentives that they use to drive profitable growth through their channels.
We have the software that enables them to implement those strategies and we have some of that domain expertise in house, but channel impact really brings that strategic consulting viewpoint. So.
So that together, we can give hi tech customers, a complete viewpoint and complete value.
Our next question comes from the line of Joe Vruwink with Baird. You May proceed with your question.
Great Hi, everyone I'm, Jason it sounds like you've gotten to the point yeah.
Yes ramps became somewhat more calm and you have two two and a half years ago Youve gotten to the point, where you have some renewals under your belt I'm just wondering when you compare.
The TCV or what ultimately is getting put into our P.O. a with the renewals how much larger do those tend to be.
Well, there's a few moving parts in that Joe and let me just kind of give you the high level framework in the two and a half plus years that I've been here, we've been working on standardizing all of our contracts and moving towards a three year contract. So you know, we've certainly seen the benefit of that.
But then as I stated we've also in conjunction with that you know started ramping roughly a third of our deals and now in the code that era, we've seen that go up to to 50% of our deals which does have somewhat of an impact on on short term our PEO.
And then we are starting to see the benefit of some of those deals that we ramped to two and a half years ago as they renew and.
And I would say the positive thing there as we've continued to see deals renew at a very high rates upper Ninetys on our air are on we expect that to continue but we're not yet at that tipping point, where we have enough historically ramped deals of renewing that they overcome.
Ramping that we're doing on in a high deal volume quarter like Q4, right now, but I do see a do you think over the next 12 to 18 months that does start to equalize and become a tailwind.
[noise]. So I guess my follow up to that yeah. I think for 2021. The expectation is that topline subscription growth is maybe more like high single digits and I appreciate that you know that the.
Seven figure had when wed ramp structure being incorporated into that outlook.
Got you also had once upon a time a target that maybe revenues could sustain 12% to 15% west all the different moving pieces.
So the thought that with the ramp deals that are maturing and flipping around to eventually becoming tailwinds that it's more like 15% is that better than 15% just kind of how do you think about the model Directionally. If we look out a few years and modeling.
You know gets the benefits of these ramps.
Yes. Good question, Joe. So I think you know pre covidien pre increased ramping you know we started to see the potential of model N and saw US approaching you know that that mid teens growth and we do believe that post pandemic that things will get back into that normalized mid.
Teens mid teens range, and we think we benefit from both some of the ramp deals and building a backlog right now that we've been doing plus just a return to more normal selling motions, we benefit from both of those things.
Okay. Thank you that's helpful I'll leave it there.
Thanks, Jeff.
Our next question comes from the line of Brian Peterson with Raymond James You May proceed with your question.
Thanks, Hey, guys, Kevin here on for Brian as I think about the record deal volume. This quarter can you help to parse out the impact from new business development versus any potential timing shifts from earlier in the year and how should we think about go forward sales cycles relative to recent activity levels.
Kevin would you mind repeating the first part of that question our line broke up a little bit.
Oh I apologize I was just trying to get a sense of I guess parsing out the record deal volume that you saw this quarter. It and you know I always that composed from new business development versus any potential timing shifts from some of the deals that may have gotten pushed from earlier this year.
Yeah. It's a good question. So our bookings continued to be slightly tilted towards customer base, just because of some of the the naturally larger deals.
In the basin and SaaS transition. So you can think about it being tilted north of 50% towards customer base and I'm glad you asked the question about the deals slipping out both pre and octa pharma were actually too.
Deals that we had in our pipeline and we are intending to close really right at the beginning.
Of the pandemic and both of those deals just simply needed more attention on the deal structure and a couple of additional approvals and so I think you know I'm glad you asked that question because it shows that we are seeing deals slide right and just need more attention on the economics and approvals versus completely going away.
Okay.
Okay, Yeah that's helpful.
And then maybe just at a higher level as you think about the broader white space opportunity can you help to frame, which products you're most optimistic about what do you see as the key areas that should drive that incremental adoption over the next two to three years.
Yes so.
I think we still have a very interesting white space just in new logo acquisition that is in and of itself and the one of the two top two fastest growing pipeline error.
Areas in the company, that's a new team that we've built out over the last 12 months as I mentioned earlier. So you know I think of that as white space in the new logo market and you know, we typically will land there with our provider module to help customers manage the contracting and and delivery of products to.
The to health care providers or payers, depending on what their their business model is in the customer base. There's two things that are systematically are important we've already talked about SaaS transition quite a bit but some of our products that enable customers to effectively handle the tendering.
Process and the go to market process in Europe.
I think are going to continue to be quite interesting those present unique opportunities for as as we're going through a SaaS transition so.
That's an important one as well.
And then on the high Tech side as we kind of look generally at our pipeline. It is tilted a bit more towards new logo acquisition and and the white space that we still have there and again the profile of customers or prospects that we see there are really growth tech companies that have growth end markets that really need.
To bolt in the infrastructure to scale their businesses.
That's helpful. Thanks, Jason.
Thanks, Kevin.
Our next question comes from the line of Gene Mannheimer with dollar tree and Cole you May proceed with your question.
Thanks, Good afternoon, congrats on a great year end.
What is helpful for maybe an update on the on the new CFO appointment if you could provide any any color there.
I wanted to ask about product density I think that's a number you gave are used to give about once a year and just want to know where it was where it is today and.
Where you'd like that to be going forward. Thanks.
Yeah. Thanks for the question gene.
So first on the CFO search.
We have hired to retain search firm, we kicked the search off shortly after davids transition out of it he was announced so.
Four or five weeks.
Weeks ago.
And I will share to positive things on the search first of all we've had very strong market response, and a lot of excitement about the long term future of model and so we have got a number of candidates who have engaged and also a number of active candidates that are working their way through the process. So that's been very.
Pleased with the the response there.
And then in terms of product density I assume junior you're talking there about kind of our six or seven products that we have to sell to customers and where we are from a a penetration perspective.
Yes, that's correct.
Yes got it.
Yes. So you know we continue to make great progress there and it's part of the reason why as I mentioned in one of the earlier questions. One of our investment areas is in in the customer base and investing more in sales there and we still have a significant multi hundred million dollar opportunity just continuing.
To sell.
Sell products into our customer base. There's a few different plays that we can run there we can take existing footprint that a customer hasn't deployed into other divisions in the company and then depending on where we've landed landed in the accompanying what their business model is there are other products that we can sell them to occur.
Comedy government contracting go to market in Europe.
For the commercial market here in the U.S. so.
Again, we continue to view that customer base and monetizing it independent of SaaS transitions as a multi 100 million dollar opportunity and that's why we're investing there.
Gene D. The annual number we talked about before is a 130 customers in the cloud on the average of two.
Two and a half products.
Yes, we have that in our supplemental as well.
Okay. Our next question comes from the line of Joe Good when the JMP Securities. You May proceed with your question.
<unk>.
Hi, Jason Thank you for taking my question just.
On on the SaaS transition when a customer is going through that conversion.
Do they need to be upgraded to a more recent or most recent on Prem version before going to the cloud for or can they just go from really any version of existing version bomb premise into the cloud is there any dynamic there any color would be great.
Yeah. Thanks for the question Joe.
So the answer is it depends most customers do have an initial step to get current and then make a move to our cloud offering and this is again, where we're trying to take it very customer friendly approach and ER and take the right approach for that customer some customers.
Say, hey, I want to do I want to get current and move to the cloud all in one motion and others say I want to get current stabilize and then move to the cloud as say 90 days or 180 days after the upgrades so.
We see both approaches there's pros and cons to each but at the end of the day, we do it the right thing is for the customer and and and the right thing for their environment.
Got it. Thank you and then just a follow up if I may.
On the pipeline yeah understood. Its recovering can you talk about kind of the cadence of that recovery has has not recovered covered Ben let's say accelerating as we move through the fourth quarter and then a tool up until today. Thank you.
Yeah in terms of the overall pipeline dynamics in life Sciences, we did see a little bit of a dip.
Very early in the pandemic and then a very consistent up into the right recovery.
Throughout the year.
And I believe that's going to continue to occur as we move into into 2021.
And then on the high Tech side, it's been more of a a more muted but steady recovery since the March timeframe, and we're now above cobot shock levels covert Chuck to our pipeline.
Levels, but still not at pre pandemic levels, but I do expect over the next next few quarters, we will get back to that those pre pandemic levels.
Great. Thank you.
Thanks, Jeff.
Our next question comes from the line of.
Josh well either with JP Morgan you May proceed with your question.
Great. Thanks for taking my questions guys.
If we could actually just follow up on that on that last bit there, Jason RMB high tech side and the recovery.
You know do you feel like there is.
Are you just waiting for demand from the customers to come in or are there certain things that are.
Sales.
I'm not necessarily discounts, but just sales programs or incentives that you can do to try and make it more enticing for that side of the house to move a little bit more quickly.
Yes. Thanks for the question Jackson good to hear from you you know I would say the Ah theres been a couple of things that we've really been focused on in high Tech.
During this period the first is making sure that we've got the right team on the field as I talked about more broadly we see cycles like this as an opportunity to top grade and pick up key talent and make sure that we've got the right team. So we've been focused on that.
We've also been very focused on outbound pipeline development one of the values of a being a vertical software company as you would know.
Well is we're not trying to be all things to all people. We have a set of named accounts and so our business development reps and account executives have been very focused on outbound prospecting and again targeting those customers who are willing to buy now and taking advantage of some of the incentives that we can.
We can add to help them move along but also building longer term pipeline for the next.
12 to 18 months has been a very important focus as well to set us up for the recovery.
Okay, and then just a quick follow up maybe on regulation given kind of the way things at least appear like they are going to shake out and with.
You know Mitch.
Mixed leadership, I guess going forward in the U.S.
What is can you just kind of update us on on how the company views either.
Increased regulation deregulation, I know, you mentioned and life science, but.
Yeah, just updated thoughts on kind of this mix leadership, we have in the U.S.
Yeah. This has probably been one of the most interesting topics that I get asked about since I've been at the company and you know I I've said pretty consistently all along that I don't see regulations getting any simpler in fact, regardless of who's in the White House I think they probably continue to be.
Fairly complex and that benefits us honestly in both of our markets and high Tech and life Science is because we are the product and the partner that helps customers unravel that.
Complexity and drive topline and Bottomline improvement, so I don't see it changing to the negative side for model N I see it actually continuing to be a positive part of our value prop.
Yes makes sense all right. Thank you.
Thanks Jackson.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr., Jeff Jason blessing for closing remarks.
Well. Thank you operator, we appreciate everyone joining our call today and all of the great questions and we look forward to talking with all of you.
Throughout the quarter. Thank you very much and good night.
Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.
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