Q4 2021 Model N Inc Earnings Call
[music].
Good afternoon, and welcome to model and Fourthquarter in fiscal year and 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Any one should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded with that I would like to turn the call over to Caroline counting boss Investor Relations.
Good afternoon, welcome to model and Fourthquarter, and physical 2021 year and earnings call.
This is Carolyn Dallas Investor Relations for Madeline.
With me on the call today are Jason blessing model and Chief Executive Officer.
John Ederer, Chief Financial Officer, and Kathy Lewis Chief Accounting Officer.
Our earnings press release was issued at the close of market and it's posted on our website.
The primary purpose of today's call us to provide you with information regarding our fourth quarter and fiscal year 2021 performance and offer financial outlook for our first quarter and fiscal year ending September 30th 2022.
The commentary made on this call may include forward looking statements. These.
These forward looking statements are based on management current abuse and expectations as of today and should not be relied upon as representing our views as if 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 SEC.
In addition, during today's call, we will discuss non-GAAP financial measures.
These non-GAAP financial measures should be considered in addition to not as a substitute for or isolation from GAAP results.
Reconciliations of non-GAAP metrics to the nearest GAAP metrics are included in the earnings press release issued today, which is available on our website I encourage you to visit our I, our web site at Investor Dot Muddle N dot com to access our fourth quarter and fiscal year 2021 press release periodic S. E C report.
And the webcast replay of this call.
Finally, unless otherwise stated all finished with comparisons in this call will be to our fiscal year 2020th results.
And with that let me turn the call over to Jason.
Thank you Carolyn and welcome to our call today.
I am pleased to report that our fourth quarter results beat expectations on total revenue subscription revenue and adjusted EBITDA.
R Q4, Punctuates the end to a strong 2021 for modeling and I'm very proud of how our team is executing.
Transitioning from an on premise two SaaS business model as a public company is not an easy or quick process.
But we are in good company with many others, who have successfully made the transition which resulted in stronger more sustainable business models.
As I reflect on 2021, I am pleased with our overall execution and the progress we've made with our growth lovers.
Part of transitioning to SaaS business model involves taking care of our customers and moving them forward with us and last year, we made significant progress on this front.
As of the end of 2021, we have transitioned approximately half of our on premise customers to the cloud.
As I have talked about on previous calls are transition methodology is finely tuned in the cost and time to move customers to the cloud continues to decrease in quality has been excellent.
We also still have a significant amount of future incremental a R. R associated with moving customers to the cloud in front of us.
Any of these remaining deals are with our larger customers and we expect the impact on our financials to be positive, but potentially lumpy on a quarterly basis.
The guidance that John will provide today contemplates closing a portion of these big deals and 20 twenty-two but also infuses some conservatism to give us room to work as it can be difficult to predict the precise quarter. When these deals will close.
Given the success, we are having with SAS transitions. We're also starting to see our maintenance decline at an accelerating rate compared to recent levels again, John will provide insight into this when he gives our annual guidance in a moment.
In addition to successful fast transitions overall sales velocity continued to accelerate during 2021 due in part to the changes we've made over the last three years to our selling motions, most notably building out dedicated customer and new logo sales teams in.
In 2021, we close 34% more total deals versus the prior year and the number of new logo signed grew by 44% over 2020.
I also continued to be pleased with the progress, we're making integrating the Deloitte acquisition, which we have rebranded business services.
This business significantly expands our total addressable market, enabling us to sell to companies from Prerevenue up to the largest in the world that prefer to buy an integrated software and services revenue management solution.
We have already seen our emanate thesis play out with key wins at main pharma morphosis and in queue for with Sarah core and an existing customer who has been using model N in their European division for many years.
The latter is a great example of our ability to realize revenue synergies by cross selling business services into our core model and customer base.
In addition to revenue synergies, we've also improve the overall profitability of this business significantly and the first year.
I would also like to call out the continued strong performance of our professional services team, which is delivering strong financial results and high quality projects.
This team had a remarkable 2021 and has built a strong backlog for 2022.
I'd like to address one final high level point before moving on to queue for highlights.
We have heard consistent feedback from investors that they would like more specificity on the progress we're making on our SAS transition.
We recognize that this progress is not always obvious in our quarterly GAAP results.
In addition to the SAS transition progress metrics that I already provided I would also like to share. Some additional metrics that we feel illustrate the progress we're making as we reinvent model and.
First one of the key drivers to our subscription growth has been the fact that model and provides a high R. O Y mission critical solution, which results in very strong renewal rates.
Our SaaS subscription gross retention rates are best in class at above 95% and during the 12 months ended September 30th 2021, or net dollar retention rate was 118%.
We expect software subscription gross retention to continue to be 95% plus and net dollar retention to be in excess of 110%.
These retention numbers show that we are building a durable SAS business.
And finally today, we are introducing more specificity on the growth of our SaaS business something that has been difficult for investors to understand given the other components included in a recurring subscription revenue line, such as maintenance and term licenses.
Or 20 twenty-two we are targeting to exit the year with SaaS revenue growing at 20% and we expect this to accelerate and 20th twenty-three due to the progress we're making on our key growth levers.
I hope this additional commentary helps investors better understand the progress, we're making as we reinvent model of that.
Next I'd like to give you an update on our recently completed quarter.
Success in queue for was driven by a healthy contribution from all growth levers, we signed multiple new logos two SAS transitions numerous customer base expansions and we also enjoyed strong renewals across the board.
And similar to last quarter, we close to a healthy amount of deals with solid contributions from both life Sciences and high Tech.
Turning to SaaS transitions during the quarter, we signed M D Serrano and alkermes.
M. D. Serrano is a terrific taste study of why customers are moving to our cloud.
This customer was running an older version of our software and was concerned about the risks associated with having a mission critical product on an aging on premise infrastructure.
Model and revenue cloud will ensure that E. M. D is always current and has access to our latest innovation to address the dynamic regulations that are reality and life Sciences.
In recent quarters, we've talked about a strong pipeline and an increase in sales activity and it's encouraging this quarter to see that trend continue and result in a high number of closed deals.
As I mentioned earlier, we are seeing nice synergies as we've integrated the acquired Deloitte business services group into our sales and delivery teams.
As we've said previously. The addition of this offering opens up our Tam by helping us to land new logos as well as expand our relationships with existing customers. A great example of this is the customer that I mentioned earlier that has been using model in in Europe for many years and will now subscribe to business services to support their U S. A.
Operations.
Also during the quarter for sending his copy of global top twenty-five pharma and Med Tech company successfully completed the SAS transition to support their U S operations.
This project is significant because the customer retired several legacy on premise customization adopted new model and functionality and reduce their overall cost.
After moving to the cloud and taking advantage of our elastic compute capabilities. The customer is reporting that certain processes that took 15 hours to complete are now taking minutes.
I recently heard from for sending us as executive sponsor and he couldn't be happier with the implementation and the value that model and clouds solutions are delivering to his team.
Turning to high Tech, we continue to see improved traction in this part of the business during.
During the quarter, our sales team signed two new logos, including cricket and <unk>.
Cricket is a 1 billion dollar global manufacturer of computer controlled cutting machines and scanners for the consumer market.
Cricket is starting their model and journey by implementing channel data management in their international Division.
One of the key decision makers at cricket is a prior maudlin customer and based on his favorable experience with us he selected us again.
We always loved to see repeat customers.
We also continue to see our land and expand strategy pay dividends during the quarter, we had numerous upsells within our high tech business, including Andy Micron Seagate and targets.
Targets is a terrific example of how our land and expand sales motion set this up for additional expansion opportunities in the future.
Our initial deal with targets closed in Q2 2021.
Went live in early Q3 and expanded their use a channel data management in queue for cut.
Customer case studies like targets showcase the new model and and the rapid time to value that our customers see from our products.
Turning to professional services, our team had another great quarter to cap off a fantastic year.
In Q4, we had several successful go lives, including key projects at Regeneron secure us western digital and crushed strong.
We also had one of the world's largest med tech companies, which we announced as a new logo in Q2 2021 go live on a global tender management product in Europe.
Our services team continues to deliver on time on budget and at best in class margins.
As I mentioned earlier I also expect strength to continue in our services business as the team has built a substantial backlog as we head into 2022.
Turning to product our team continues to deliver and I would like to highlight an important new product that we're working on closely with a group of our largest life sciences customers.
Specifically, we are in the final stages of rolling out a new state drug pricing transparency management solution.
In the last few years over 20 states. In this list is growing have enacted new drug price transparency laws that are starting to take effect.
These laws require manufacturers to report information about any new drug lunch or price changes along with the justification or the change.
Due to the complexity of the requirements by each state drug manufacturers are looking for efficient ways to manage this process and stay compliant.
Given our trusted advisor status and deep domain expertise maudlin as a natural partner to work with our customers to simplify this complexity to.
To address the need we have developed a new solution that we feel will help our customers navigate this new legislation and help them to remain compliant.
And finally, we are excited that I D. C recognized our high Tech products, we in there recently published Marketscape specifically.
Specifically I D C named modeling as a worldwide leader in price optimization and management applications and they're 2021 vendor assessment.
According to the ITC Marketscope model and provides users with granular control of pricing for high Tech use cases, along with strong channel management capabilities for things such as market development funds rebates win probability and other incentives.
Customers highly rated model N and described are products is being built for their future due to model and comprehensive high tech industry specific features.
We're very proud of our high Tech solutions and how we fare during the rigorous evaluation from I D C.
I also loved the customer recognition and the quote that maudlin is built for their future.
This outside praise is the ultimate endorsement of the value we provide to our customers.
I'd like to close by saying that I'm pleased with our execution in 2021 and that I'm excited about the year ahead.
Our maniacal focus on our growth levers of SaaS transitions customer expansions and new logos is paying off.
And as I noted earlier, we still have significant runway and all of our growth levers, which makes me optimistic about the road ahead.
I'd now like to turn the call over to John to discuss our queue for financial results and provide an update on our guidance John.
Thank you, Jason and good afternoon to everyone on the call today is.
As Jason noted, we closed out our year on a high note exceeding our targets for revenue and profitability.
Total revenue upside was driven by subscription revenue as organic growth improved in the fourth quarter.
We also had steady improvement on subscription gross margin and continued strong operating expense controls in queue for which drove the overperformance, an adjusted EBITDA and earnings per share.
The contributor to our improve profitability compared to our guidance has been a successful integration of the business services group, which was two quarters ahead of plan.
In summary, while we're still navigating the migration of our business model, we are executing well and back on a profitable growth path.
And I'm looking at our specific results for the fourth quarter.
Total revenue grew 24% to $51.5 million, including 6 million of revenue from business services and this exceeded the top end of our gardens.
Subscription revenue grew 29% to 38.2 million, including the addition of business services.
And finally professional services revenue grew by 13% year over year to $13.3 million.
Turning to profitability for the fourth quarter non.
Non-GAAP gross profit was 31.7 million or a gross margin of 62%.
Gross margin was down slightly versus Q4 last year due to the addition of business services, we have seen steady sequential improvement this year from 57 per cent and Q2 to 60% in Q3 and now 62% in queue for.
Non-GAAP gross margin for subscription revenue was 70% in queue for which.
Which also was down versus Q4 last year due to business services.
[noise] sequentially from 68% in Q3.
On an organic basis, the non-GAAP subscription gross margin for core model in was slightly above Q4 last year and remains in the mid 70% range.
Non-GAAP gross margin for professional services revenue was 39% versus 37% in queue for last year is this team continues to execute very well.
And operating expenses for Q4 were lower than expected due to the timing of some hiring and other investments.
As a result, adjusted EBITDA for the quarter was 7.9 million representing growth of 14% year over year and well ahead of the high end of our guidance of $5.5 million.
Adjusted EBITDA margin was 15% for Q4, which is the second quarter in a row that it has been back in the mid teens range and largely reflects the successful integration to the business services acquisition.
Finally, non-GAAP net income was 6.6 million or 18 cents per share versus the high end of our guidance of 11 cents per share.
On an annual basis for our fiscal year ending September 30th 2021.
Total revenue was $193 million for the year up 20% year over year, driven by subscription revenue of 142 million, which was up 23% and professional services revenue with $51 million up 14%.
Adjusted EBITDA was $26 million for the year, which was up 22% versus last year and represented a margin of 13%.
Looking at the balance sheet and cash flow, we ended the quarter with $165.5 million of cash and equivalents, which was up 11.7 million from the end of June.
Cash flow from operations. During Q4 was 9.9 million up from 7.2 million in queue for last year.
And current deferred revenue was 57.4 million up 3.8 million sequentially from the end of June and a 13% on a year over year basis.
In terms of our P O or remaining performance obligations.
Total balance was $220.7 million, representing an increase of 34% year over year.
Current R. P O totaled $107.3 million, an increase of 22% year over year.
While our P O metrics may fluctuate on a quarterly basis due to contract Lynx or the timing of renewals overall, we've seen strong growth in our P O, which provides better visibility on our future revenue.
Let's look ahead the fiscal year 2022, there are a few key trends to focus on as we continue to transition the business.
First SAS transitions for our larger customers are accelerating which is good news overall for the business, but it is important to understand how this will impact the model.
We are starting to see some seasonal patterns for these deals that correlate to the budget cycles of our customers and as a result, we anticipate the associated revenue to occur during the second half of our fiscal year, which is similar to what we experienced last year.
Second the increase in SAS transitions is starting to put pressure on maintenance revenue and we expect quarterly declines in maintenance to accelerate starting in the second quarter.
Last year maintenance revenue declined in the mid to high single digit rates and we expect this to increase to the low to mid double digits. This year.
Third all setting the declines in maintenance revenue is the continued growth of our sauce revenue.
While we are still dealing with the crosscurrents in our overall subscription revenue for FY twenty-two SaaS portion is now the majority of our subscription revenue and will be the key driver of our business going forward.
I hope you understand the dynamics of our SaaS business will provide metrics for SaaS annual recurring revenue or a R. R and sassnet retention.
<unk> a R. R represents the annualize value of our daily SaaS subscription revenue for the most recent quarter.
We finished F Y 21, with 83.8 million and sauce, a R R, which was up 23% on a year over year basis.
In terms of net retention related to our SaaS business, we finished the year at 118%.
While we might see some fluctuations in these metrics in any given quarter. We've typically C. Net solid retention in excess of 110% and we're targeting to exit FY twenty-two with sauce, a our our growth at 20%.
In terms of our specific guidance for F Y 22, and the first fiscal quarter. We expect total revenue to be in the range of 49.5 to 50 million.
Subscription revenue to be in the range of 37 to 37 and a half million dollars.
Justin EBITDA to be in the range of four and a half to $5 million and non-GAAP ETS to be in the range of eight to nine cents per share.
Based on a fully diluted share count of approximately 36.8 million chairs.
For the full year of fiscal 2022, we expect total revenue in the range of 211 to 214 million rappers.
[noise], representing 10% year over year growth at the mid point of the range.
Subscription revenue in the range of $150 million to $255 million adjusted.
Adjusted EBITDA in the range of 23 to 25 million, which reflects an 11% margin at the mid point of the range.
And non-GAAP EPS in the range of 44 to 49 cents per share based on a fully diluted share count of approximately 37.3 million chairs.
Finally, an additional bit of clarity for the second quarter of FY twenty-two as you build your models.
Oh, we won't provide specific guidance for Q2 today, we do expect subscription revenue declined sequentially from Q1, primarily due due to a client and maintenance revenue and the result of two existing model and customers who have merged and are integrating their contracts with us.
The second quarter is also expect it to be higher from an expense standpoint, due to seasonal increases in employee benefits.
As a result Q2 is expected it to be the low watermark from a profitability standpoint, with both revenue growth and adjusted EBITDA margin accelerating over the second half of the year.
In summary, we are committed to driving profitable growth, even as we transition our largest customers to the cloud.
Helping these customers make the migration to a cloud platform does require investment across many elements of our business, but we are managing this process in a responsible way to ensure a smooth transition for our customers and a balanced approach for our shareholders isn't.
These investments will ultimately drive higher growth in future years, SaaS revenue becomes an even greater proportion of the business.
With that I'll turn the call back over to the operator for any questions that you might have.
Okay. Thank you at this time, we will be conducting a question and answer session. If you'd have to ask a question. Please press star one on your telephone keypad.
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One moment, please while we can call for questions.
And our first question comes from the line.
And for me it would be T. I D. Please proceed with your question.
Yeah. Good afternoon. Thanks for taking my question nice job on the quarter.
<unk> I guess starting off on a bunch of the sauce metrics that you did update and thanks for that Jason.
When you look at now that you have over 50 per cent of your customers in some capacity on on the SaaS platform and you've done a number of transitions wonder if we're going to get an update in terms of what the average uplift is from that maintenance recurring stream into the SaaS payments.
And then as you look at the other call 50 per cent or a little less than that that are still to transition you highlighted that a number of them are some of your largest customers should we expect that uplift to be quite to the level you've seen so far uhm or with you know the sheer volume in size of those customers potentially push that down.
Slightly.
Hey, Matt Good evening, it's Jason I'll take that question. So yeah first of all just to be specific on some of the SaaS progress metrics that we cited we've transitioned 50% of our on premise customers to the cloud we have a broader footprint of customers actually using cloud products because we do have.
Some hybrid deployment out there so just to be clear 50% of on premise implementations have transitioned as of the end of fiscal 21.
And you know in terms of the uplift yeah, we've kind of talked about two and a half to three and a half as as being the ZIP code and I think that's generally held pretty true as we've gone through this first cohort roughly half of our customers, which does include some of the larger customers I do think though generally speak.
Looking larger customers have broader deployment and.
Do negotiate better pricing because of the broader footprints that they they have a model and and I do also want to clarify that yeah. It's.
It's over half, it's significantly more than half of the E R or benefit that we've talked about of moving customers to the cloud is still in front of us because so many of these customers that remain that we see transits transitioning this year or next our some of our largest customers.
Alright, very helpful and then on the the new products that you're the the state drug transparency product then you're preparing to launch how much of of kind of a broad module based pricing do you expect that to be or is it a smaller add on.
I guess, maybe what what might be comparable to across the rest of the platform in terms of overall scope of a possibility. If you were able to cross sell that occur within your entire customer base that has a U S business.
Yeah, a great question, Matt So first of all we're Super excited about this opportunity and I think it really represents the value of model in in the relationship as a trusted advisor we have with our customers to.
To step right in and help address some of these changes you know the the the regulatory changes that come up you know the best way to think about this as it is a subscription based product as with any of our subscription based product.
Customers will get benefits from bundling and so forth.
And this one I would <unk> kind of characterize it as a mid sized opportunity in terms of the products.
Portfolio products that we have in terms of add on capabilities. It is also something that is practically.
Practically needed by almost all of the companies that are selling as you point out in the U S. In the states that are enacting these new laws. So we see it as a very interesting opportunity for us and we have in our guidance contemplated the effect that we see those having on the business this year.
But do you think it's a very exciting opportunity over the next couple of years, particularly as more states adoptees pricing transparency laws.
Thanks, and then maybe just one clarification John on on the guidance for 22 can you just remind us our help us remember if there's anything from the ramp contracts that you have sold for SaaS transitions uhm that is either sort of outsized in 22.
Or or maybe Conversely, uhm, we will have a much smaller impact on 22 reported revenue versus that are are growth. Thanks, yeah.
Yeah sure so with regards to the ramp deals and twenty-two to some extent, they're a they're a non factor there there's still an element there that the press the overall revenue, but when you compare to FY 21, it doesn't have as much of an impact from a growth rate perspective, where we would start to expect to see a tailwind.
And from the ramp transactions is really more out in 23, if some of these first deals start to renew.
Alright, great. Thank you I'll jump back of a cute.
And our next question comes from the line of Chad minute with Craig Hallum. Please proceed with your question.
Great. Thanks for taking my question. So just a few questions around the net expansion metric that you've given the last couple of quarters and it was pretty strongly this quarter at 118 and a trailing basis. So if we think about that.
A couple of different ways.
You know and I I don't want to get too into the details, but if we look at kind of life's not your life Sciences customer base in the net expansion, there and and we think about it from a a kind of a net new.
Uhm addition, you know cloud SAS edition versus a conversion.
You know with the net expansion metrics look any different between those two kind of cohorts of customers.
Yeah, but this is Jason thanks for the question, let me just make sure I understand so are you <unk> are you is the question is net dollar retention stronger with our cloud customers vs on premise customers.
Yeah, So if I'm thinking about a cloud customer that converted.
Right from from maintenance and and and what their net expansion rate has looked like in the last 12 months versus a customer you added just net new logo in the cloud in the life Sciences business 12 months ago over in how they expanded over the year.
Yeah, I got it I understand great question. So.
As we've talked about on past calls SaaS transitions have increasingly proved to be a catalyst for cross selling up south and there's a variety of different things that we can do we can sell enhanced levels of service.
Which is baked into our recurring revenue often times when we do SaaS transition, we're able to position new modules as well as part of the benefit of moving to the cloud.
And then we also have seen examples where we're taking a footprint in one company and more broadly or excuse me in one division and more broadly deploying it inside of the company and so when you look at the the totality of the cross selling up cell that's been attached to the SAS transitions, it's been pretty robust not to say that some of the.
New logos that have expanded are robust you know they just they follow a slightly different path because they become a customer they have a product. They go live on a project. They stabilize and then they come back and buy more so it's just been a little bit of a different buying pattern, but again just increasingly we're seeing faster.
<unk> as a catalyst to broaden the footprint in these accounts.
Got it good color. Thank you and then just in terms of you know I and and it's good obviously you have a target out there for net expansion going forward, but just curious if there's something just.
I don't know how you dress the deal ramp question, what's the you know the answer with the last question, but.
Why would we we decelerate potentially from 118 don't you know I know you're targeting 110, but want to do better but is there something going on you talked about seasonality in the first half and migrations, but I don't know that that impacts internet expansion number necessarily why why would.
Decelerate from 118.
Yeah. This is John and and thanks for the question I.
I guess I would I would actually look at it a little bit differently and so when we look historically at where this number has been and it's been.
Typically in the in the 110 to 115 range. The this quarter of course, we're a little bit above that range at 118%, but it has been consistent it does move around a little bit from quarter to quarter, which I think is is normal and so I don't necessarily think about it is is decelerating other than being in the range.
And I think that's consistently where we've been and what we would expect to see going forward.
Okay and then.
And that has happened between call. So if he addresses John I apologize, but did you speak to gross margins in fiscal year 22, and specifically you know the the two revenue segments and how they at least Directionally go from from where you exited 21.
We did not speak specifically to gross margins Uhm and I think you can see you know the the recent performance and I was <unk> and I would use that as an indicator for F. Y 22, I would also pay attention to the revenue mix that that's included in our guidance as you look at the total.
Gross margin for the company.
Okay. Thanks, so much.
Thanks, Jeff.
Our next question comes from the liner Bryan Mcdonald Needham and company people see what's your question.
Hello. This is Alex on for Ryan. Thank you for the question could you give us an update and how the J&J migration is processing and also what would be the impact on the pipeline from that notable migration.
So the J&J project as we've talked about in the past is kind of a three phase.
Journey with with J&J, the first was J&J Japan.
Which we signed and wildlife last year, we're in the thick of it right now with one of their divisions, there Med Tech division and working through a bunch of different architecture and implementation issues and then we still have their pharma division out there as.
As well so that's a big multi year program and we're right in the middle of it right now.
[noise] Great and then also you were cited as a leader in the market space for you to be pricing optimization advantage. You've been applications are you able to leverage that and we'll go to market perspective.
Yeah. That's a great question. So the ITC market escape that recently came out we fared very favorably there.
And there's there's a couple of things that stick out first of all customers still turn to these third party analysts too.
To whittle down their list of who they're going to invite to rfps and buying processes. So it really helps us there the thing, though that I think was really interesting about that report is there were some customer feedback in there that said model in is built for our future and one I thought that was a pretty cool quotes.
And then two they went on to talk about how model in is not just a generic pricing and channel management solution. They talked about it being built specifically for high Tech, which I think really reinforces our value as a vertical software company and not trying to be all things to all people, but trying to be very good in a couple of focused verticals.
[noise] great. Thank you.
Thanks, Alex.
Our next question comes from the line of Jackson Eater with J P. Morgan. Please proceed with your question.
Hi. This is my all for calling on French Awesome I just wanted to know if if anything has changed since <unk>, what kind of preliminary commentary I'm trying to last Horner.
Well I suppose we've we've reported a fourth quarter, but other than that no I would say that our our guidance is consistent with the comments that we made last quarter I would note that the that the comments. We made were based on the consensus estimates at the time for F Y 22, and I believe that our our guidance is still in line with the comments we <unk>.
Last call.
Okay and then just.
A follow up so just wondering maybe maybe it talks about the strong from the last one question.
Quite a walmart's 34.
Both Clara was too. So just now is that more to do it kind of a season hobby you mentioned earlier and let the customer business cycles I can't remember what was <unk> private channels there.
Yeah. It's a great question me and if you widen the aperture and look back over the last couple of years. As an example, you will see that number of fluctuate quarter to quarter from one to two Z to four to five and there is some seasonality perhaps emerging in the business and that and I think it's a good thing by the way it seemed like more customers to.
Vacations this summer and we're kind of returning to seasonality as we've known it enterprise enterprise software over the last 2030 years, so little bit of seasonality in there, but I wouldn't I wouldn't lock in too much on the absolute number quarter to quarter, it's more of a.
A statistic that you have to evaluate over a multi quarter period and it was up year over year. The amount of SaaS transitions announced last year excuse me. This year was up sequentially over the last year.
Got it that makes total sense. Thank you.
Thanks to me.
Yeah.
And as a reminder, if you have any questions you May press star one on your telephone keypad to join the questioning I C Q.
And our next person we have one in mind would be.
<unk> with married people see what's your question.
[noise], great [noise] hi, everyone.
I'll just step back of that because get into communication that transitions are accelerating and you'll see a net and your maintenance revenues start to.
Decline it faster pace I mean, these are somewhat seminal events and the broader context of south transitions Ah and so I'll ask.
Why is this happening here now entering your physical 20 to get the transition Ark has been a number of years in the making maybe you can just speak to what customers are thinking about maybe if they're if they're yeah. It's a function of comfort levels are or maybe it specific things.
<unk> has done from learning is over the years that are just because they're saying the company in a better spot.
Yeah, Joe appreciate the question I would agree with you.
Seeing maintenance start to decline in SaaS transition story is a seminal event. So thank you for pointing that out totally agree.
I think it's a it's a combination of factors as we got through last year, we started to see more and more large customers either start transitions or express interest in starting a transition this year.
And the reason that customers are getting more comfortable is.
One they're able to now look at at a couple dozen transitions and see that they've been successfully completed they're seeing those customers adopt new innovation, they're seeing those customers take updates, particularly a regulatory updates more quickly and so I would characterize it as there's just a a growing sense of comfort in the base that.
We have this figured out.
So as I said as we exited last year and started to knock down some of these big deals and then really started to look at the implications on maintenance this year as well as look at some of the deals.
That are likely to close this year, that's what led us to update our guidance on maintenance and.
Indicate that we are at that important tipping point.
And just on the last point about deals closing <unk> 22 is it possible to characterize how much of the guidance you're providing today.
Is dependent on executing on those new opportunities as opposed to I suppose what you already have visibility on doesn't function of normal renewals coming out bad visibility as a function of of ramp contracts from prior years.
Yeah, Joe Uhm.
It won't be able to give you specifics on the call today, but I'll describe it a little bit for you in terms of the increased visibility.
His ability that we're seeing.
As we look at the business is more and more transitions to recurring and specifically the sauce side of it we do have quite a bit more visibility in terms of the out year I guess, one metric I could point you to actually is the R. P O and so if you look at how our our P. O has been trending particularly the car.
<unk> R P O.
That has increased as a percent of our forward revenue over the last couple of years. A couple of years ago was probably about 50 per cent of our forward revenue I think exiting F. Y 21, if you do the math and look at the midpoint of our guidance range, you'll see it's about 70% of that subscription revenue and so we're feeling.
More confident in terms of the overall visibility that we've got on the business.
Great and then just a quick final one can you say where maintenance revenues finished the year and <unk>.
Yeah. So uhm I do appreciate the the question and we're not going to talk specifically about the the dollar value of the of the maintenance, we don't want to get into a situation are starting to break out all of the different elements of our subscription revenue line and we did want to provide a.
Little bit of an indication in terms of what's happening to it from a growth rate perspective, but increasingly as we look forward at the business. The key driver is going to be that fast revenue, which is why we are providing the SaaS a R. R metric as well as the the net retention that goes hand in hand with it. So you can have a little bit more insight into what the key driver is for that.
Line well some of the other items will do what they're going to do over the course of the next few years.
Okay. Thank you I'll leave it there.
Thanks, Jeff.
Our next question comes from the line of Brian Peterson would Raymond James. Please proceed with your question.
Hi. This is just just didn't get to go on for Brian Peterson.
Thank you for taking my question I just have one thing on following up on a trend of the theme of high Tech coming back recently, especially in terms of a mix of new booking and what isn't that I shall corner of the queue for.
I know that Peter Demick as high Tech with a straw grind part of business, but can you talk about demand indicators a pipeline bill currently in your C. Prime market today that shows how about going back to plead <unk> pandemic levels. Thanks.
Yeah, Thanks, Jessica and if you don't mind I'll broaden that question to include both life Sciences and high Tech so.
As we've talked about over the last year and a half during the pandemic life Sciences has continued to be a very robust and I don't know that we're quite back to prepandemic levels, but certainly in life Sciences. It really does feel like we're fairly close to that a lot of our customers are back in the office, we're going to visit customers again.
And that vertical scenes C.
Seems very robust as we head into our 21 excuse me physical 22, and then yes, Hi Tech continues to improve and as we discussed in the past.
We've really been focused during the pandemic on existing customers, where we already are well known.
Partner and look for opportunities to expand their and as we've reported in our results that strategy I think has paid off quite well as we've enjoyed several cross cells and upsells in the high Tech base and then as you have seen in the last couple of quarters. We've now started announcing new customers again in high Tech.
So I.
I think it's a it's a vertical that just in general has started to recover from the pandemic as you see in the business News every day. It's also part it's.
It's a vertical the part of the vertical that we service is also one that's having incredible demand.
Based on all of the different global macroeconomic factors and they are starting to invest again and solutions like model and that helped them automate and address some of these demand issues. So so yes, hi Tech is also coming back and we feel good about both verticals as we head into 2022.
Thanks.
Thanks Jessica.
And it looks like we have time for one more analyze.
From the lineup Terry coming.
From shoes.
Go ahead with your question.
Hey, guys. He says Joe mirrors on for Terry Thanks for taking the question I. Appreciate it if you guys could just comment on how your sales capacity is right now where are you currently hiring and.
How salesforce retention has been over the last quarter.
Yeah. So great question. So we've invested a lot in sales over the last couple of years as we built out dedicated teams to go after new logos sell into the customer base, we built out a customer success team.
We've invested an additional sales leadership as well as building out of World class sales ops function.
So the last couple of years, we've really been about building the foundation and starting to build on top of that foundation and so we come into this year with a great sales capacity great team that's ready for this year and in terms of the the hiring were doing you know I would describe it as just continuing to build on this foundation and a little.
Bit of a splash on the life sciences customer base, given the huge opportunity that exists there potentially a little additional hiring in our customers success group. Those are the two kind of focused areas, where we're hiring but it is really built on top of the great Foundation that we've built.
And then in terms of retention, we have fared well there relative to some of the things that you read in the market model and is known as a great place to work and generally speaking knock on wood, we've had pretty good retention throughout the pandemic and and even up to today.
That's good to hear and this is a follow up real quick within life Sciences.
The verticals of pharma Med Tech and biotech.
I guess in those those three where do you see the biggest white space.
Opportunity into 2025th.
Well with with pharma and biotech kind of being the heritage of the company and and and all of the large customers. We have there's a huge amount of white space, they're selling into other divisions, selling new products and expanding to Europe. So I would characterize that one is more of the.
Near term opportunity sizeable near term opportunity and then med Tech is area that we've been investing in too.
Go after we announced the deal management solution that we've built earlier. This year that is purpose built for med tech and that makes us more competitive and more value added med tech and so I do view med tech longer term as an.
An interesting growth opportunity for us and we've already got some great lighthouse accounts based on top 10 pharma many of them are farm and med tech customers. So some of our med tech capabilities, we built out in partnership with them and I think that presents.
Mid to longer term growth opportunity that we're really excited about.
I appreciate the color there thanks guys.
Thanks.
And we have reached the end of the question and answer session. I'll now turn the call, which is C O Jason blessing for closing remarks.
Thank you operator, and thank you everyone for joining US today, we look forward to seeing you throughout the quarter and throughout the year and updating you on the progress of model and so thanks again and have a great evening.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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