Great. Good morning, everyone. My name is Craig Hettenbach. I cover the health tech space for Morgan Stanley. Welcome to day two of the conference. Very pleased to have with us Model N, CEO Jason Blessing and CFO John Ederer. So welcome. Good morning. Thank you. Good morning. Maybe just for investors who are new to the name, if you can just touch on the revenue management space and in particular, the traction that you have both across life sciences and high tech? Sure. So good morning, everyone. Great to be here. We had quite an adventurous trip from the West Coast yesterday, dodging the storms, but we did make it, and glad to be here. So Model N is a vertical software company. We actually serve two different verticals, high-tech and life sciences. And life sciences is about 85% of our revenue, and we really think of ourselves as a life sciences tech company. And as Craig was saying, our portfolio of products include software, data and analytics, and some subscription services, really focused around an offering called Revenue Management. So what's revenue management? Revenue management is a class of software that focuses or that helps companies maintain all the complex pricing, contracts and incentives that they use to deal with their complex distribution channels. That's the one thing high tech and life sciences have in place, is they have very complex multi-tiered distribution channels. In particular, our secret sauce also is that we track all of the regulatory requirements for big pharma companies which I'm sure we'll talk a little bit more about, but that's a very fluid dynamic environment right now. And so we abstract away all of that regulatory complexity for our customers, so they can focus on getting their life-changing products to the world. And then in terms of our value prop for customers, we have pretty consistently proven that we can go into a customer or a prospect and help them save 5%-7% of their revenue that's just evaporating off the top line because of poor commercial compliance. They're not adhering to the contracts and the incentives, or heaven forbid, they're having regulatory issues and paying penalties. And then maybe the final point, our customers are a bit of the who's who of life sciences. We've got all 10 of the top 10 global pharma companies, and so obviously that includes the J&Js, the Pfizers, the Novartises of the world. And then on the high tech side, Western Digital, AMD, are just a couple of examples as well. Great. Maybe we can touch on, before we dig into the business, just touch on the macro backdrop. And if I think about the SaaS business for life science has been very resilient. The services piece has been maybe a little bit more sensitivity, and in high tech market, the last couple of years have been pretty volatile. So just what are you seeing out there in the macro and in customer discussions? Yeah, I mean, it wouldn't be a meeting these days without talking about the macro. So, as I said, 85% of our business is pharma, pharma and med tech, but heavily, heavily weighted towards pharma. And I'll start with the positive. A big part of our business, global pharma, really is still full steam ahead, regardless of what's going on in the macro. I wouldn't say they're throwing caution to the wind. They're paying a lot of attention to what's going on in the macro environment. But for the most part, big pharma, they're investing over five, 10, 15-year time horizons. And as I said earlier, the compliance environment is very fluid right now, and so pharma companies have to continue to invest to stay current there. We do have a couple of offerings that are subscription services, and the simplest way to think about these services is they provide enhanced levels of support for our customers all the way up to potentially fully outsourcing revenue management. We have seen customers view that as a little discretionary, and so we have seen a little bit of tightening there this year as we've gotten into the year. And then also at the low end of the market, with the capital markets and the condition they have been over the last couple of years, emerging biopharma launches have slowed down quite a bit, with IPO window effectively being closed, that market's being more challenging. And so we have at the low end of the market, which isn't a huge part of our business, we have seen a little bit of tightening there. I guess the good news is, in the second half of the year, we can see in the pipeline of approvals that that's most likely gonna pick up. So, so we're watching that closely and see some, some green shoots there. And then tech has been a bit of an enigma over the last couple of years. During the pandemic, our tech customers batten down the hatches, expecting we were gonna fall into this, precipitous, you know, economic cycle. And of course, the opposite happened. Everyone was cooped up at home and spending money, and we ended up with these dramatic supply chain shortages that still plague us today. I will say this, I think this year, tech has stabilized, and they're working to reconcile that supply and demand issue. And so we started to see market leaders that our customers invest and kick off projects, and we've seen some nice pipeline growth as well. So, we're optimistic that after a couple of years of tech, which again, is 15% of our revenue, probably starts to bounce back in the next 12-18 months. Great. I wanted to get into just data and AI. I mean, that's been one of the buzz of the markets this year. And what we're trying to do at this conference is try to get a sense for companies, like the tangible impact to your business. And so I know for some of your products, you already incorporate data and analytics, but can you just speak to the investments that you've made and how this is really gonna impact, you know, whether it's the growth or efficiencies in your business? Yeah, as I was thinking about this, knowing this question would most likely be asked, I struggled to narrow it down to a manageable list, but I'll try. There's a few products that I'll just talk about today, that we've built that are very popular. The first is one called Global Launch Excellence. So as you probably all know, in Europe, the price of pharma, pharmaceutical therapies is generally priced under a model that's called reference pricing. And so that means one country's what they're willing to pay Pfizer for a drug is typically indexed to another basket of countries. So it's called international reference pricing. And so based on that, there's major implications of how you bring a product to market. You wanna hit the biggest patient populations that are the most profitable to you based on reference pricing. And so our product, Global Launch Excellence, aggregates up all of the data, all of the pricing, all of the patient populations, and makes recommendations on which countries to go to first, hit the most patients at the most profitable price point. The product also has some other interesting scenarios that it can model, where let's say you change a price in Italy. Well, the change of the price in Italy might have an effect in Switzerland, and so you can make decisions on how you want to discount or not. So that's an AI product that we have in the market today that tends to demo really well, and our global customers love it. Data as a service is a thing that we're also moving more and more into. In our upcoming release, which will come out here in a couple of months, we're bringing something called International Reference Pricing as a Service. So the rules that I just referenced, we'll be syndicating that data and making it available to our customers, so they no longer have to worry about maintaining it. We also, in our Global Price Management product, have some algorithms that make recommendations to customers on which tenders in Europe to pursue, how to price them based on win-loss data, market share information. And so there's some predictive analytics in that product to help customers make more informed go-to-market decisions. Maybe one more, if I can sneak it in. The other thing that we're doing is working on some, some functionality that will actually take the complex products that our customers have, I mean, a, a large pharma contract with CVS, for example, and it could be thousands of pages, and they're very complex, lots of interdependencies in the contracts. And so we're working on. This is more in the labs, but we're working on some technology that'll take a look at the historicals of all those contracts, make some predictions or some assessments of which products or contracts met the expectations, and then create templates for our customers to use. So they come to the table to a negotiation with a template and a, a set of commercials and regulatory considerations that is predisposed to, to drive better outcomes for them in the future. So lots of interesting stuff there, and of course, we're doing some of the stuff internally around support and some of the development tools and so forth. But I think the product customer-facing stuff is more sexy. Got it. It's interesting 'cause I think there's been a lot going on behind the scenes, even though the market's now, you know, paying attention. So when you look out next 12-18 months, do you see from Model N a continuation of some of these trends or anything else you would signal in terms of, "Hey, this is something to watch," in terms of the implications for the business? You know, one of the things that I think is interesting about Model N, as I was saying in my opening answer to the question of what the company does, is that we abstract away complexity for our customers from the regulatory environment. I never thought I would sit on a stage and say, "I love regulation," but it is a tailwind for us. We happen to be in an environment right now where we have three regulatory bodies of work that really are impacting large pharma between 340B from the Affordable Care Act, state price transparency, which has really been taking off as the federal government has punted on state on drug price transparency rules, and then, of course, the Inflation Reduction Act, which was enacted last July. All three of those are things that... or regulatory environment in general is something that we pay attention to because that does drive demand for our products, and in many cases, actually can be the genesis of new products. So that's certainly one thing we look for. And then, as I talked about earlier, we continue to watch the biopharma and the drug pipeline and approvals, and then keep our eye for green shoots on the high-tech side of things. Got it. As you mentioned, regulation, that certainly has come up through the conference the first day as pharma companies adjust to the IRA. And you mentioned it could create demand for you. How do you think about that in the grand kind of scope of the business in terms of whether it's new modules you have or what these regulations mean for your outlook? Yeah. So as I said I mean, it is certainly a tailwind to us because we help customers simplify that complexity. And I think about the three regulatory regimes that I just mentioned. Two of those three have resulted in new products, and then the Inflation Reduction Act is definitely driving demand, not a new product, but definitely changes to our product. So just give you an example for each. We have a new product that we rolled out within the last year called 340B Vigilance, that takes all of the claims data and aggregates it up and compares it to the contracts and the incentives that are stored in Model N and identifies everything, honestly, from fraud to duplicate chargeback requests for our customers. We co-developed that product with Gilead and Astellas, and they've seen a lot of interest in that product as customers continue to wrestle 340B. I think it's 15, 20 years later from when it was actually enacted. State Price Transparency Management is another interesting one. As I'm sure you're all well aware, Obama, Trump administrations punted on, price transparency rules at the federal level, and so, of course, the states were more than happy to step in and create new legislation and potentially new revenue streams. I think we're up to over 22 s tates now have their own state price transparency management laws. And not only do they have the laws, they're really, last year and this year, starting to step up compliance to drive revenue. So we co-developed a product with Pfizer to address this issue for our customers, and that's because that's come at us like a freight train over the last couple of years. That's also been a very popular product along with 340B a nd then Model N is still working with our customers and the industry to figure out exactly how the Inflation Reduction Act is going to get implemented. Obviously, we now know the first 10 drugs as of last week that the government is going to go after. But some pretty significant architectural changes to Model N will be the system of record to track the inflation and the index to inflation, what rebates drug manufacturers can pay. There's going to be some new calculations on how those rebates get paid. We'll announce this in our upcoming release, here in the next couple of weeks, but we're making major enhancements to the product to be ready for our customers, to be compliant with the IRA as it gets implemented. And that one's, I think, still a bit of an open... I'm sure people talked about this at the conference this week, so we're open on how that's going to get implemented, but we're at the center of the action and have a front-row seat. Got it. You brought up just some of the co-development of products, and if I take a step back and I think about where Model N sits in the strategic, you know, one of the things about the Model, you have very high retention rates- Yep. Good customer traction. What is it about Model N that these big pharma customers are choosing to do work with you in terms of the co-developed products versus go with other vendors out there? Yeah, it's a great question. It reminds me of my very first week. So I've been at Model N now for about 5.5 years, and in my second week, I came back to the Northeast here and visited, I think it was 10 customers, and I was meeting with the CIO of a top five pharma company, and I said, "Mac, what, what does Model N mean to you? Why are we important to, to you and your business?" And it was interesting. He said, "Well, first of all, we always think of Model N as keeping our executives in suits, not orange suits. We stay out of jail because of Model N." He said, "It's also the most audited system in the company, and the data that's in Model N goes to our board every quarter. It's part of our board pack. And so it just gives you a sense for the importance of the data that we're collecting. I always tell people we sit at the nexus of the health of the human race and politics, so things are fairly complicated at that nexus. And so customers tend to think of us as a strategic partner to help solve some of these pithy, thorny issues that come up. 340B with Gilead is a great example. State Price Transparency Management with Pfizer great example. I think now, as we've gotten nearly all of our customers to the cloud, given the business model transition we've gone through over the last several years, that allows us to actually now allocate more and more of our development resources to co-innovation, and we're just getting started on that too. We announced some new products at Rainmaker, our user conference, and every one of those products has a line of customers behind it to help with the co-development. Great. Well, it's a good segue into the transition from on-prem to cloud. You're mostly most of the way through it. I think there's a dozen or so customers that you've talked about high level that still have to get through. Can you just talk about kind of maybe why some of those customers are taking more time? And I think one of the investor questions would just be risk of, like, do they sign or do they go with another alternative? Like, how could this play out? Yeah. So, at the beginning of this fiscal year, we noted we were about 70% of the way through our cloud transition. We've made additional progress this year. We've committed to updating investors on an annual basis, where we're at with our progress, so that'll happen in November when we do our fiscal call. We have seen in this final cohort of customers, those customers needing a little bit more time and attention on their business case. Obviously, at 70% of the way through, we're pretty good at this. And that said, we have still had to spend a little bit more time with these customers on the business case. The other thing that I've seen in this final cohort is they tend to be the more aggressive negotiators in our customer base. Every customer base has, in my experience, has a group of customers like that. And so they've also been difficult, some difficult negotiations. And when I step back and I look at the business I'm running, we've got 70% of the customers who've made the transition. They're happy. Our Net Promoter Score is disproportionately higher with these customers. They're reporting great value. So I'm not going to give away short-term economics just to close a deal in Q2 or Q3, because I know the value of our software, and I know we can get these customers live and happy. We also have an end-of-life deadline coming up in December of this year and I would be amazed if a market access executive was willing to say, "Hey, I'm going to go unsupported on my compliance system. I'm not worried about the IRA. I'm not worried about some of these other things."... So I think we ultimately, you know, we always try and incentivize customers with a carrot, but sometimes at the end, you know, you need to hit them with the carrot, and the carrot becomes the stick, and for us, that's end of life. And then maybe the last point to your question, Craig, on where else could these customers go? That's another thing we feel pretty good about, that we've got a great competitive position and, and really are the market standard to handle revenue management for large pharma. I've had a couple customers go out to RFP because they had to, as they were contemplating their SaaS transition. And those two customers came back and said, "First of all, we weren't really sure who else to send the RFP to. And secondly, you really are, we think, the only one who can handle our complex needs. So there's always a possibility, but I think the odds are in our favor. Got it. Maybe just building on this, when I think about the customers, you mentioned the high NPS. What are some things that are really resonating with them through this transition? And the flip side for Model N, you talked also about, you know, Amgen as an example of using more. Can you talk about... I guess maybe we'll start with the first one from a customer base. Yeah. I mean, in some respects, I think our transition of our customers to the cloud and the value you would hear them talk about is like any other segment of software or group of customers that have moved to the cloud over the last 20 years. You know, they talk about things like reduced overall cost through elimination of OpEx, elimination of upgrades. Upgrades, by the way, with legacy Model N, super painful. Every three years, millions and millions of dollars for a customer. So just getting rid of the OpEx and the upgrades has been a huge part of it. I've also had a bunch of customers tell me, just in general, the progress we've made innovating on the software, and even some of the things that we may think of as mundane performance improvements, have made a huge difference in users' lives. One example, we have a top ten pharma customer who told me that they're to close the month in their most complex contract, I think it was with CVS, the job that would run and calculate all of the rebates and chargebacks and, or excuse me, the chargebacks, and all of the final pricing from point of sale would take them up to three days to run, and oftentimes it would error out and they'd have to restart. Now, it's running in three to four hours. So just basic things we take for granted around elastic compute, being able to bring that to revenue management Model N solution has made a huge difference for our customers. But the thing also that really stood out to me, and I really got to got to touch this in person at our user conference recently, was just how excited customers are to innovate, kind of that theme that we've been talking about throughout the discussion this morning. Being able to be current, take advantage of our seasonal releases and the, you know, the iterative enhancements that come out there, but then also be on cloud our cloud platform and get access to new products, has been exciting for customers. And then also to be able to put their head on the pillow at night and know that they're always gonna be compliant because they're current, and as the regulatory environment changes, we're there making those updates and deploying those, sometimes on a monthly basis, depending. So it's, it's a wide range of things, some kind of basic cloud, but also, customers really getting excited about innovating with us. Got it. And so maybe we can follow with just the Amgen kind of anecdote, but more broadly, the company's talked about $2-$3 for cloud versus on-prem kind of uplift, and I think White Space, $210 million-$280 million. So it's a significant, significant opportunity, but what's your confidence like as you kind of transition? And even just from a sales motion perspective, what are some things that are changing now as you go after that new opportunity? Well, it's interesting, speaking about the change first, since the last part of your question, every one of these SaaS transition projects was a bespoke sales cycle. It was complex. It was tailored to the customer's unique requirements. And so it's been great to start to shift gears and get into a more normal selling motion, where we have commercial products with standard value props and pitches that we're pulling off the shelf and selling, to our customers. So in some respects, as we complete the transition, the selling motion into customer, the customer base is, is getting a little cleaner. One thing also that we've talked about that's been pretty consistent is when we go into a SaaS transition with a customer, you know, admittedly, that is a technical architecture shift, first and foremost, some of the benefits I talked about in the prior question. But the business executives that are paying for these projects say, "What's next? What's the value to me?" And so every one of these customers has typically a two to three-year plan of, after we get live in the cloud and stabilized, here are the next series of products that we're going to implement. And so Amgen is implementing a couple new products. They went live, stabilized earlier this year. It tends to take maybe one to two quarters before customers will come back and take a new product. Amgen's also a great example because we've also got our global products on the roadmap with them next year. Amgen's not unique in that pattern. We've seen this pattern in most of our customers as they've gotten current and stabilized. Fast transitions have really been a catalyst to open that enormous white space opportunity in the base. Great. John, maybe we can shift gears- Mm-hmm. Just to the margin profile. You know, in Q3, you had a pretty notable EBITDA beat. Can you just talk about some of the inherent operating leverage in the model and what we should think about as this transition plays out? Yeah. No, absolutely. I guess first off, thank you for noticing. I feel like the Q3 profitability upside maybe went a little overlooked. But we are starting to see good leverage in the business model, and a lot of it goes back to the transition that we're making. And so as we move customers over to the cloud, and we get to focus on one business, one cloud business, that gives us a lot of opportunity for leverage up and down the P&L. You know, starting first on the support organization, only having to support the cloud platform, gives us more leverage and scale. Same type of thing on the R&D line. Today, we have our team dispersed. They still have to support some of the legacy products as well as customers doing SaaS transitions. In the future, we get to focus that on new product innovation. And so I think for the same dollars, we'll actually get more new product innovation out of our R&D investment. And I think you see similar kinds of leverage on the sales marketing side of things as well. Today, our sales team does have to spend quite a bit of time working with customers that are doing SaaS transitions. In the future, it'll be a much more traditional land and expand type of selling motion, and I think another opportunity for leverage. And so you're already starting to see some of that benefit in our P&L. If you look over the last couple of years, we've been making steady progression on the Adjusted EBITDA margin, and I think we're poised to continue to do that. Got it. And as you complete the transition, how do you think about over a multi-year basis? Is there a steady cadence to margin? Are there any kind of things to keep in mind will depend on, you know, where revenue's at? How do you think about that? Yeah, I would say that, philosophically, our approach has always been about profitable growth, and we look to add incremental benefit to the bottom line each year. Having said that, we are also looking for opportunities to invest for growth, and so we balance those two things as we go through our planning cycle. I would expect steady, you know, continued improvement, on the margin side of things, as we move through the next couple of years. And if we step back and think about ourselves as getting to a Rule 40 business, the way that we are likely to get there is with a much more balanced approach. And so, you have much more of an even balance between growth and profitability, as opposed to a forty percent growth and zero percent profitability. We're gonna be somewhere more in the middle. Got it. All right. Jason, maybe just going back to you, you alluded to Rainmaker before, which is a unique user conference. Can you just touch on kind of this year, key takeaways and, you know, how does it compare maybe to prior years or just where you're at from the business model transition? How important is this conference? Yeah, so, this was our first Rainmaker back in person post-pandemic, and it was also our largest Rainmaker ever. And so, that right there, I think, shows the interest in the company and some of the issues we're helping our customers solve, and frankly, just that thirst people have to get back in person and and collaborate again. So attendance was very strong. The second thing that I walked away from this user conference with is, it's moved from being a software user conference to an industry event. And I've been doing enterprise software for 30 years, and these events are sales events at the end of the day. This one did not feel like a sales event, which is exactly what you want. We had an amazing group of customers, industry experts, and Model N experts, who in many cases, are also industry experts, collaborating and talking about many of the issues that we've talked about this morning. So it was just remarkable to sit there and watch my team and this community that we've created debate and litigate some of these complex issues. I think you've really... When you have a conference like that, you've elevated from a vendor to a strategic partner and an advisor. So this is another thing I walked away from the conference with. The other thing at our conference, you know, we tend to open it wide to industry people. We allow investors to come and obviously our customers. You know, we had a lot of customers there who have recently converted their or gone through a transition to the cloud. When you sprinkle them in with investors, customers who maybe haven't moved to the cloud, and prospects, you know, you never really know what you're gonna get with that stew. The feedback I heard this unsolicited from customers and prospects and investors. So, you know, this is one of the few conferences I've been to, where people aren't just complaining about the software and wanting more innovation and whatnot. They said, "Hey, Model N has walked the talk on these cloud transitions." That felt really good to hear, 'cause we pride ourselves on execution. Then finally, people just excited, saying: "Hey, this is a new Model N. This is a company that is getting through the cloud transition and actually building meaningful new products that we ascribe value to. So overall, it was a great event, and I think it took me a couple weeks to come down from it. It was so exciting. All right. Well, well, as we wrap up here, I know there's a lot of work that goes into this customer transition to the cloud, right? And so as you kinda see the light at the end of the tunnel there, what, what are you most excited about as you look out the next 12-18 months, that in terms of the business, where it's at and the prospects? Well, it's interesting that you mention the transition. You know, we've spent almost every minute talking to investors, spending that minute talking about those minutes talking about the cloud transition. Cloud transition for us, as we've talked about, was about a $70 million growth lever, converting that maintenance to recurring revenue. And that is by far the smallest growth lever in front of us. So I understand why everyone's obsessed on the transition, but you know, we're coming out the other side, and that unlocks the more exciting opportunity for this business. We have a huge $400 billion TAM. You know, as a sub-$300 million company, $4 billion TAM, and so there's an opportunity now to invest more in new logos and drive new logo acquisition. We touched on it briefly, but we have great global products and really are just getting started expanding and selling globally. And then, Craig, as you pointed out, we have this enormous opportunity in our White Space. So and then we have. And that's just what we have today. Those are the products and the footprint of the company that we have to go execute today. And then there's this cadence of one to two new products per year that expand the value we can deliver for our customers. So, you know, we're excited, and we're proud of what we accomplished with the SaaS transitions, but that really just laid the foundation for this company to build and grow over the next several years, not just 12-18 months. And that's ultimately what I'm excited about. Great. I think we'll end on that note. So Jason, John, thanks so much for your time this morning. Thank you. Thank you. Appreciate it, Craig. Thanks. Thanks.