We've got John, and we've got Suresh. Thank you both for being here. Absolutely. Happy to be here. Thanks. Thank you. Wonderful. Maybe let's, let's kick things off. You know, Model N's a new name for me. For the generalists in the room, maybe it would be helpful to start with a little bit of just an overview of Model N and the cloud transition you've been on, before we kind of jump into specifics. Yeah. Happy to. Sure thing. Yeah. Good morning, Rishi. Good morning, everyone. Thank you for coming. Glad to be here. Model N, we are the leading SaaS solution provider for what we call revenue optimization and compliance. We serve two industries. The first one, the majority of our business comes from life sciences. We help pharmaceutical manufacturers, biotech companies, and med tech companies. And then we also have a high-tech business, where we focus on semiconductor and high-tech manufacturing players. We are privileged to call, you know, 16 of top 20 players on the life sciences and 14 of top 20 players on the high-tech side as our customers, and we are continuing to grow. If you look at our product portfolio, we are mainly a SaaS solution provider. We help our customers manage all of the pricing of the products, contracting, commercial contracting, rebating strategies, discounting to drive up revenue for our customers. We also have a huge compliance angle, especially on the life sciences, with both federal regulations and then state and international regulations going up. We have products that are catering to manage the regulatory complexity of our customers. Switching to the high-tech side, our customers manage all of the, huge volume of, you know, semiconductor products and the pricing, real-time pricing, working with channels as the channel sales drives up. And also incenting them and understanding the inventory levels and how to dynamically respond to the, market demands in terms of pricing, so that's what we do. In summary, our products are sitting in between ERP systems in the back end and then CRM solutions in the front end, orchestrating essentially the revenue flow through the system, if you will. Yeah. Got it. No, that's really helpful. Maybe let's talk a little bit about the cloud transition that you've been on. So maybe how would you say progress has been going? And maybe more importantly, as you think about migrating that final cohort to the cloud- Yeah. ... maybe what kind of impediments have there been, and what tools in your arsenal do you have to really get them across the finish line? Yeah. No, absolutely. So overall, I think we've actually been making excellent progress on this, and we are approaching the end. And so at the end of fiscal 2022, we had about 70% of the life sciences customer base migrated over. At the end of fiscal 2023, which for us is September, so just the September quarter, we are up to 85%. So we're down to that last cohort now, and I would say that we've been following a fairly typical bell curve. We had our early adopters, we had the majority in the middle, and now we're down to the end of the curve. There are a couple of things that we have in our toolkit, if you will, to get folks across. I mean, I think first and foremost, there's a strong value proposition to bringing them over to the cloud and opening them up to the new innovation that Suresh and team have done over the last several years. The other thing is that we've announced an end-of-life date for on-premise support. A nd that was, t hat's coming up at the end of this calendar year, December 31st. So we announced that about three years ago. I think that's what helped motivate most of the folks in the middle of that curve to get going and to get over the line. I think that we'll have a few stragglers that don't quite make it by December 31st, but I do believe we'll get the rest of the life sciences folk over in fiscal 2024. Yep. And maybe alongside that, have you seen any kind of macro pressure impacting those decisions to move to the cloud? Yeah. Maybe it's different between life sciences and high-tech. Yeah. I would say that, for us, the macro pressures have been on a different part of the business, so I don't think it's really impacting the SaaS transition activity. We did talk a little bit. I think over the summer, we had some of the SaaS transition deals slide to the right a little bit, but then in the September quarter, we closed five of them, and so we're kind of getting right back on track. And there, I think the issues are really more about budget cycles and the timing of the projects and that sort of thing, and making sure that the customer is ready to go with a SaaS transition. Where we've seen more impact from a macro standpoint has been on the subscription services part of our business. And so some of you might recall, we acquired a business out of Deloitte a few years ago. That business is targeted more at, earlier-stage biopharma, and we've seen a little bit more impact from a macro standpoint there. Yeah. Got it, got it. So I wanna go back now to the most recent earnings, because you introduced these medium-term targets. Mm-hmm. You know, a lot of investors kind of took that pretty well. Maybe let's start with what drove the decision to give that to us on an earnings call at that point? Yeah. More importantly, what's giving you the confidence in those medium-term targets exiting the cloud transition? Yeah. I think there was a couple of things that we did on the earnings call in an attempt to provide more clarity to investors, and they kind of go hand in hand. And so one was we provided additional disclosure on the subscription revenue stream. And so for us, embedded in that total subscription number are three things. One is the SaaS revenue, which is the lion's share of it and the strong majority. The second are the subscription service offerings that we have, where we're taking services, wrapping them around software, and delivering that and selling that on a subscription basis. Those are the two ongoing pieces of the business. There's a third bucket, which are the maintenance and term licenses. The maintenance and term licenses are the legacy licensing model for the on-premise world. And we're actively converting those over to SaaS. But when you look at our total subscription number, it's a mix of those three. And so, SaaS has been growing very strongly, subscription services growing more moderately, and the maintenance and term licenses declining very rapidly. And in FY 2024, the math for us is challenging. We have, maintenance and term licenses are expected to decline by more than 50% again. And so when you've got that piece coming out, it's harder for the other two to overcome that. And so as a result, you've got our, our consolidated guidance, which is at about 6%-8%. If we fast-forward a few years, and we're done with the maintenance and term license downdraft, the math starts to get a little bit easier, starts to work in our favor. And so sustaining even just a 15%-20% growth rate on SaaS, mid-single digits on the subscription services, is a recipe that gets us back to double-digit subscription growth. And we feel like we've got good opportunity to do that. For us, the SaaS transition has been kind of the first step to ultimately getting to being a fully fledged cloud business, where we have much more of a traditional land and expand selling motion. We're very focused on driving new logo activity. We're very focused on driving cross-sell and up-sell activity. We're very focused on introducing new products that will ultimately feed that cross-sell, up-sell opportunity. And so for us, we feel like we're focused on all of the right drivers that ultimately get us to those kinds of numbers. Yep, yep. And then maybe let's talk on the gross margin side. Can you remind us of, like, how we should be thinking about the drivers of gross margin expansion? Mm-hmm. Maybe, you know, Suresh, as we think about architecturally- Mm-hmm. ... is there anything that you and your team can do to, you know, better optimize infrastructure and even get those SaaS gross margins themselves up, whether that's, you know, just better optimization, whether that's leveraging Kubernetes, et cetera? We are doing that already, Rishi, and as you may have seen, and John may have talked about it as well on the calls, year over year, how we are optimizing our cloud delivery. We are using Kubernetes. We are using all the latest technology to deliver efficiencies through our multi-tenant solutions on the back end. And also we're continuing to automate a lot of it, so we can reduce the human footprint, and a lot of the systems that we're using to manage our cloud delivery is all fully automated and up and running. Other thing I want to point out is we are following a very thoughtful and deliberate multi-cloud strategy. Mm. For example, we work with AWS, we work with Azure, we work with OCI, Oracle Cloud Infrastructure, more recently. And depending on how we are loading up, what kind of workload we can move to which type of cloud vendor. We have very, very good long-term terms with them in terms of how we are loading up, what kind of workload we can move to which type of cloud vendor. And year-over-year, we're able to manage that very well and effectively to drive up margins, if you will, gross margins, and it'll continue to grow over time. Yeah, we didn't provide specific guidance in the midterm model on gross margins, but the point has been well taken. S o we'll consider that for future iterations. But I will describe, I think, some of the key drivers. You know, Suresh already talked about some of the things that we're doing on the software side of things, and for the software line on gross margin, I would say it's more about continuous improvement. The second area that we're very focused on is really on the delivery of the subscription services. And for part of that business, we've done a nice job of getting a good mix of onshore and offshore resources. But I think there's an opportunity to do more there, and drive some improvement on the subscription services piece. And so, those two together should help drive the overall subscription gross margin. There's a third piece that I would point out, which is that the software gross margin is higher than the subscription services. And so as that continues to be a bigger proportion of the overall subscription number, that should drive gross margin as well. Yep, that makes sense. And maybe as we move now down the P&L, right? You have been showing some pretty impressive margin expansion. Yeah. You've guided to continued margin expansion- Yeah. ... in fact, marching towards a Rule of 40. What, what's driven the margin expansion so far? And beyond the gross margin side, on the OpEx line- Yeah. ... maybe what can you do to drive further, you know- Yeah. ... margin expansion? Well, first off, thank you for noticing. I think that I feel like that's something that's maybe been a little overshadowed on our last couple of calls. And I naturally understand there's been a lot of concentration on the outlook for FY 2024. B ut you know, Q3, Q4, and even for the full year, you know, I feel like we produced really solid adjusted EBITDA results and showed significant margin improvement, you know, from 14% a year ago to 17% in 2023. And so, we've been on a pretty steady pace of margin improvement. There's a few areas in particular where we see opportunity, where we've already seen some opportunity, and we see continued opportunity. So, first off is with my friend, Suresh, and on the R&D side of things. Part of the transition from on-premise to SaaS is that we have a lot of legacy products still that need support. We also provide support to our customers during the SaaS transition. As that activity goes down, we're able to shift resources and focus on new product innovation. And so actually, we've been increasing the dollars in R&D, but we've been decreasing as a percent of revenue. And we're able to shift resources and still get more new product innovation out. So that's been a big area of leverage for us. The second area of opportunity is really on the G&A side. We, I think, have made some investments over the last few years, particularly on the technology side of things that we now have the opportunity to grow into. Sales and marketing, we've actually been trying to keep pace. We've been investing there. We've been investing in sales capacity, in particular, to drive future bookings growth, and so that's one that, you know, we feel like we're balanced. But there's still opportunity in some of the other areas. Yep. Okay. No, that makes sense. Maybe I want to talk a little bit about cross-sell right now. What has been driving some of the multi-product adoption? Maybe can you talk about some of the tailwinds from regulations, be it state transparency- Yeah. ... IRA, that, that's been helping? Yeah, I'll take that on. So the beauty of the SaaS model, picking up from where John left off, is that we can build and deliver these new products fairly quickly, these follow-on products, once customers shift from on-prem to our cloud. You brought up state price transparency as an example. We listen to our customers, work with them fairly closely. In this case, the SPTM, as we call it, was co-developed with Pfizer. Mm-hmm. And so we understand their pain point. They are a large manufacturer. They understand the pain points of the broader industry, and we also tested with other customers. So they adopt, and we are driving these up, as, you know, developing products with our customers as design partners. So they validate the problem. T hey understand that our solutions work. T hey help us design perfect solutions, if you will, and be the voice, if you will. Once other customers see leading manufacturers adopting these solutions, the rest of the industry follows. That has been really helpful. Even most recently, the 340B Vigilance product that John and Jason may have talked about on the earnings calls, we developed, co-developed it, and it's been adopted. And last week I was with the leading manufacturer of biotech products. They're... Anecdotally, they're claiming tens of millions of dollars in benefit, even the first year of adoption. So we are trying to develop a case study with them. So those kinds of, you know, co-developing products, it really helps, and easy to adopt as well on the cloud. Absolutely. No, that's really helpful. Maybe I want to go back to the macro side of the equation. Mm-hmm. I guess, first. I'll outright, are macro trends getting better? For us, I would say it's been status quo the last couple of quarters. I think, I can't recall, I think it was maybe after the March quarter, we talked about a little bit of impact that we had seen particularly at the end of March, I think in the wake of some of the banking issues and things like that. Felt like there was a little bit of tightness in the market. In the June quarter, and then in the September quarter, I would say more status quo. So, hasn't necessarily improved, but hasn't gotten any worse either. And again, where we've seen more impact is on some of those earlier-stage opportunities. Yeah, and then what about in the high-tech sector specifically? High-tech. If I take a little bit of a longer lens, you know, for us, that part of our business was impacted more during the pandemic. And took a bit more of a dip and was a little slower to recover coming out of that. Subsequent years, we've actually started to see, you know, renewed demand, and a bit of an uptick. And, you know, mimicking to some extent the cycles that we're seeing in the semiconductor industry overall. Yeah. And so we've actually seen a little bit of steadiness and maybe even improvement there. Mm-hmm. Yep. Yep. Then I wanted to talk about, I guess, cloud optimization, which has been a very big theme so far this year. Mm-hmm. Do you think that you can drive further cloud cost optimization again in calendar year 2024, after what you've done over the past four to six quarters? You know, Suresh, you were talking about- Mm. ... going multi-cloud- Right. ... bringing in more vendors, or was that kind of more one and done in terms of the cloud optimization cycle? Yeah, maybe let Suresh speak to it. B ut just from a financial standpoint, we believe there's still opportunity ahead. And so we kind of described it earlier as continuous improvement on this piece. Maybe Suresh can speak- Yeah. ... a little bit more specifically. The same thing, more, more automation, multi-cloud, and being deliberate. Having a primary in AWS, maybe secondary in OCI. It also mitigates risk for our customers too, pursuing a multi-cloud strategy. We have better economic terms by working with vendors when renewal comes, and there is more room to grow. One more thing I would add, Rishi, is that we are being deliberate in terms of what kinds of technologies we license to run our cloud as well. We use a lot of the public infrastructure, open source, rather than being tied to a cloud-native solution. We'll be very thoughtful and deliberate in terms of continuing to bring our cost footprint down as we deliver a high-class and reliable service for our customers. Yep. Yeah. Great. Then maybe I'd love to hit on GenAI. You know, if you think about some of the use cases that you're focused on, anything interesting to call out specifically? I'll take that, too. I know there's a lot of euphoria, initial enthusiasm. Like, maybe six months ago, everybody was talking about it. Now it has settled down. As an industry, we are really going after business-driven use cases and trying out different LLMs or learning models, if you will, for different use cases. In my own case, our case, we are pursuing how do we improve developer productivity within my own engineering organization? Like adopting a copilot of sorts, and where we can generate new code along with the developer. How do we make them superhuman engineers kind of thing. And we are also looking at large volume of documentation and information assets that we have to help customers help themselves in terms of customer support, learning, and new products and adopting them. We are also pursuing pilots on looking at the data infrastructure that we have. H ow do we make it easy for our customers to interact and understand their own data, and ask questions intelligently, and explore and make, you know, analytic decision-making? And also L3 support. There are lots of interesting use cases, but they're all in the early, you know, pilot stage. I expect maybe in the next 12+ months, we will be adapting them into our core mainstream development. As well as I see as an industry overall, though, the learning models could become more focused on industry-specific- Yeah. ... verticalized learning models for life sciences, for within life sciences, for commercialization, and so on. S o, it becomes more efficient. Yeah. Maybe going down a little bit on that thread- Yeah. ... you bring up an interesting point, 'cause you have a lot of data assets- Mm-hmm. ... and domain expertise. Sure. LLMs tend to be a blank slate. People don't know- Right. ... really where to get started. Mm-hmm. Does that, I guess, present an opportunity for you, yourself, to be the kind of domain expertise of LLM specifically for pharma, and how would you think about ultimately monetizing that? Absolutely. LLM, specifically understanding... We, as you called out, Rishi, we sit on a lot of interesting data. Every contract ever written by a manufacturer on the life sciences side, with their payers and providers. We collect all of the scripts, what the prices are being paid, what kind of discounting strategies that are being pursued. So, I see overall data analytics as a huge interesting area of growth for us, and we are developing products as we speak. We are exploring with newer technologies. We are investing in hiring people with those kinds of skill sets to drive new products, be it in benchmarking, comparing performance, what has worked in the past, what kind of strategies worked in the past, what doesn't work, and how do we increase the revenue for our customers? Lots more interesting products on our roadmap to come. Yeah. Yeah. I do have a bunch more questions. Yeah. I wanted to open it up in case there were any questions out in the field. All right, I'll jump right back into things. So maybe I wanna think about, you know, Suresh, you talked about some of the areas you wanted to hire. Obviously, GenAI is gonna be one of those. But as you think about headcount additions over the coming year, where are your areas of priority and focus, especially given there's, you know, obviously, wanna focus on profitable growth right now? Mm-hmm. Yeah. Well, maybe just chime in from the company standpoint overall, and then let Suresh talk a little bit more about R&D. But for us, if I look back over the last—actually, over the last couple of years, our priorities have been in sales and marketing and R&D. With maybe a third, which would be revenue-generating folks on our professional services team. And so that's where we've prioritized headcount overall. We made some concerted efforts to increase our sales capacity last year, and again, in anticipation of driving, you know, future bookings growth. On the R&D side, I'll let Suresh speak to that, but that's also been another focus area for us. Yeah, on the R&D side, I would call out expertise, domain expertise. You can never-- We have a lot of experts in-house, but there's never enough. So, I'll call out an example. We have hired a senior person with a decade of experience in my team on the product strategy side, looking at areas where we can go beyond, right? Next three to five years, what are the opportunities within commercialization? How do we help our life sciences customers with that kind of an experience? Market access, forecasting, those type of things. On the engineering side, with the newer technologies, the GenAI, more automation, RPA, where we can create more efficiencies within our own R&D organization. So newer skill sets, cutting-edge skill sets is where we are focused on investing. Yep. Yeah. Okay. No, that makes a lot of sense. Maybe then I wanna talk about competition, right? Yeah. You continue to grow your footprint with additional products within the customer base. Who do you tend to see out there? Are there actual other competitors, or is it primarily a lot of greenfield and manual processes you're displacing? I mean, honestly, it's probably more the latter. Yeah. Yeah. When you look inside some of these customers and how they're operating the processes, you still see spreadsheets and things like that. And so to some extent, you know, we're facing greenfield opportunities. There are competitors. They differ a little bit on the life sciences versus the high-tech side. On the life sciences side, we see kind of two different types. There are occasionally horizontal software providers that try to move into the life sciences market, but they don't have the same, you know, rich domain expertise that we have. The other type of competitor would be more service-oriented. And so there are some private companies out there that would look a little bit like our Deloitte Business Services Group- Mm-hmm. ... that provide service offerings to try and tackle these problems. And so that's kinda where we see the two different types. Yep, yep. Got it, got it. That makes sense. Suresh, one for you. Sure. Architecturally, what kind of drove the decision to go single-tenant versus multi-tenant? And, you know, I guess, are there areas we talked about Kubernetes, are there areas to bring multi-tenant services around kind of the common core architecture which brings a little bit of margin expansion over time as well? Yeah. We do both- Yeah. To be honest with you. Single-tenant is where we started. This company has been around for a while, and, and that is where we started, but we are a multi-tenant solution- Mm. -provider. Not all of our products are single tenant. Yeah. We are delivering our solutions in multi-tenant. Even as you speak, many of our single-tenant architecture, we have converted them into multi-tenant. Mm. Any new customers that we pursue, we can, we can put them on a multi-tenant infrastructure. The same level of performance or better performance, if you will. I wouldn't call ourselves a single tenant. It's an option. We could do either, but it comes with its own cost. Some customers may prefer, "Hey, I want my own infrastructure, but I'm willing to pay for it. Yes. We are willing to deliver. But in other cases, we are pursuing multi-tenant- Yep, okay. -deployment model. And maybe kind of another- Yeah. ... you know, you talked about the history of the company. What drove the decision to go after high- tech in addition to life sciences? And does that mean that down the line there could be other kind of highly regulated verticals that could be attractive to pursue? Yeah, it's interesting actually. The history kind of goes the other direction. And so, five years ago or more, the company was really headed in more of a horizontal direction with multiple industry verticals. When Jason Blessing, our CEO, came on board about five years ago, he looked at how we were deployed and where he saw the most opportunity, and refocused the business on life sciences and high- tech. And so those were the two areas where we were getting the most traction. We had... we were starting to build up some scale. And so he focused the business and then really drove the company to the cloud. And so that was more the strategic shift- Yeah. ... back then. As fate would happen, life sciences has now grown to the, you know, the lion's share of the business, and so we do talk quite a bit more about the life sciences side. It's 85% of the business. But high- tech is still a meaningful part of our overall company, and we do see good opportunity there. Yeah. Yeah. W e have, I mean, like I said earlier, large logos like you have who's who- Yeah. ...... Intel and the AMDs of the world are running our solution on the high- tech side. Yeah. Yeah. Absolutely. All right, a little bit of an open-ended question: What's gonna be the biggest decision that you as a management team will have to make over the next three years? Yeah, you know, it's a good question. I think that one of the things that I've been impressed by this company, and this all started before I arrived three years ago, but I think we've done a really good job of developing longer term strategies and then holding to them. And so there's been a lot of good work done to analyze the market, the opportunity, and you've heard us talk about kind of this three-pronged approach with cloud software, subscription services, and data and analytics. And so we've been working towards those goals for several years now. I think it's really more about executing on that vision and on that strategy than having to make new decisions. But I don't know if you- I would add, I would double down. We do have... I mean, with the SaaS transitions near, you know, the last in the eighth inning, ninth inning, I don't know where you'd put it, John. O ur focus is toward delivering newer products in the SaaS model, and data analytics being a huge area of focus. We have a strong roadmap for innovation. Mm. It's about executing. We are adding talent too, to your earlier question, to be able to execute on, on our plan. If you put our... I think we have a clear strategy. We've got to put our heads down and execute, and we should be able to deliver on our goals. Yeah. All right, and then a last open-ended question to close things out: What's the single biggest item that excites you about the future of Model N, and what gives you confidence that'll become a reality? Yeah, I'll- I'll take that. Yeah. I'll do data analytics. Yeah. It's a huge- Yeah. ... under exploited opportunity. Like I mentioned, we have tremendous insight into what's going on in the industry on the commercial side. We just need to deploy these newer technologies, and to deliver innovative insights, and tackle problems that are really meaningful, and drive revenue for our customers. T hat's where we see our growth coming from. Yeah. Yeah. Data analytics is a... Yeah. Awesome. Thanks. No, I would agree. I think that is the thing that I'm probably also most excited about in terms of the future opportunity for the business, and it's starting. We talked about some of the specific products and initiatives at our Rainmaker Conference, which is our customer conference over the summer. We have pilot programs in place, we have customers on board, working on these solutions with us, and I think it's a really big opportunity. Yeah. It's a great place to hop off. All right. John, Suresh, thank you so much.