Model N Inc (MODN) 2016 Q1 法說會逐字稿

Greetings and welcome to the Model N first quarter FY16 financial results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Miss Sheila Ennis. Thank you, you may begin.

Good afternoon, welcome to the earnings results call for Model N's first quarter FY16 which ended on December 31, 2015. With me today are Zack Rinat, Chairman and Chief Executive Officer; Chief Financial Officer, Mark Tisdel; and incoming CEO, Edward Sander.

Our press release was issued after the close of market and is posted on our website, where this call is being simultaneously webcast. The primary purpose of today's call is to provide you information regarding our first quarter 2016 performance, in addition to our financial outlook for the second quarter and full year FY16.

Commentary made on this call may include forward-looking statements. These statements are subject to risks, uncertainties, and assumptions.

Please refer to the press release and the risk factors and documents filed with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly report on Form 10-Q for information on risks and uncertainties. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual Company results could differ materially from these forward-looking statements.

In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of Model N's and performance, should be considered in addition to, not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations of the comparable GAAP results in our press release.

At times, in response to your question, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised, that this additional detail make be one time in nature, and we may or may not provide an update in the future on these metrics. I encourage you to visit our Investor Relations website at investors.modeln.com to access our first quarter FY16 press release, periodic SEC reports, and the webcast replay of this call.

Finally, unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our FY15.

With that, let me turn the call over to Zack.

Good afternoon, and thank you for joining us today. The prepared remarks section today will be divided into three sections. I will start with a summary of Q1 FY16. Mark Tisdel, our CFO, will follow me with the financial details. I will finish by discussing the appointment of Edward Sander to Chief Executive Officer, and my appointment to Executive Chairman.

Model N executed well in Q1 FY16, again exceeding our guidance on both the top and bottom line. We made excellent progress on executing our strategy to concurrently grow our revenues, and to transform our business to SaaS and maintenance revenue. Model N grew Q1 FY16 total revenue of 11%, and SaaS and maintenance revenue 60% versus Q1 FY15.

In particular, I am very excited by the fact that Model N reported 81% of total revenues in SaaS and maintenance revenue. This is a 25% point increase over the 56% of total revenue we reported a year ago.

Q1 marked a strong start to FY16. It reinforced in September 2015, we announced Revvy Revenue Management Application Suite. The Revvy Revenue Management Application Suite is the culmination of 16 years of developing, deploying, and scaling enterprise grade revenue management application for the world's most innovative companies.

Over the last four years, we have leveraged the proven experience to architects from the ground up Revvy Revenue Management to be both (unaudible) and enterprise grade. All of the applications are built on a single, scalable and high-performance architecture that can meet the demands of the largest and most complex enterprises.

The lynchpin of Revvy Revenue Management is Revvy configure price and quote, or Revvy [CPQ]. Revvy CPQ enables salespeople to maximize the revenues, and minimize non-productive time which is particularly a big challenge for those that are [self complex] configure product.

Revvy CPQ was specifically built to leverage and expose core elements of product from ERP system in salesforce environment, including native interoperability with SAP volume configurator which is used by thousands of companies as the source of proof for manufacture products. And Revvy CPQ was designed with performance in mind using a technology called virtual tabulation that is proven to deliver lightning fast responses to the most complex and demanding configuration and [rules cost] combination.

In Q1 FY16, we experienced tremendous success with Revvy CPQ. A global diversified technology company with over $20 billion in annual revenue selected Revvy CPQ as their standard global CPQ system across their business unit. This global leader was looking to replace a sophisticated home-grown CPQ solution with a salesforce native enterprise grad CPQ solution.

The enterprise-grade CPQ had to have the robustness and interoperability with SAP, and SAP volume configurator and performance and scalability to accommodate complex configuration and many thousands of users. After reviewing various CPQ proposals, the company selected two finalists. The company engaged one of the prominent global system integrators to conduct a proof of value, or POV, where they ask both finalists to deliver detailed business scenario actually working in product. The customer and the system integrator created each scenario based on the productability to deliver the scenario out of the box.

In Q1 FY16, Model N was selected as this company's global standard for CPQ. And together, we embarked on the global implementation with the first delivery in this quarter. In addition, Model N was selected by this customer for revenue management cloud implementation in the United States.

Another key win in quarter was [bis Corning], a long time Model N customer. Corning extended the revenue management cloud by selecting Revvy CPQ for global deployment as well after successful proof of concept.

These two wins with global leaders are strong testaments to our vision of unifying CRM and revenue management. We call it CRM- squared, because of the exponential results achieved from multiplying CRM and RM. Revvy CPQ and Revvy Revenue Management Application Suite provide our customers with the platform to turn this vision of CRM-squared into reality.

Furthermore, Revvy CPQ and Revvy Revenue Management enable Model N to expand its [thumb] into the broader manufacturing vertical and to deliver value as the bridge between CRM and the strategic, financial, and manufacturing application in data in the ERP system that enterprise companies rely upon. In the last quarter, we signed several customers that will be using Revenue Management Cloud.

Our momentum around delivering Revenue Management as a service continues with the addition of Ipsen Biopharmaceuticals. Ipsem Bio, a $1.5 billion global leader in specialty healthcare solutions, selected Model N Revenue Management as a service solution. The solution includes both the commercial and the regulatory application suite.

Leveraging Revenue Management as a service, Ipsem will be able to report government pricing, process Medicaid claims, commercial rebates, and end-to-end revenue management processes. In addition, Ipsem will be able to develop and maintain a full portfolio of gross to net models, and gain visibility into how the gross to net will be impacted from changes in pricing, rebating, discounting, market share, or co-pay problems. Model N selected, because of our Revenue Management as a service, the depths of our product line and our proven deployment methodology.

In Q1 FY16, Model N closed acquisition of Channelinsight, a leader in channel data management. Channelinsight enabled Model N to accelerate our strategy for an end-to-end revenue management application suite for both direct and indirect channel. The combination of Model N channel management and Channelinsights CBM provides companies with a leading enterprise grade end-to-end solution to manage their global channel revenues.

I am happy to report that the acquisition has gone extremely well. Model N signed two new customers within the first few weeks after the close. Sierra Wireless, a multi national wireless communication equipment designer and manufacturer headquartered in British Columbia selected the Model N channel management solution. Sierra Wireless will be able to provide channel transparency to the company and sales leadership to gain full understanding of their channel business, and to make timely decisions to drive channel revenues.

C&K Components, a leader in interface and switch technology as well as smart card and high reliability connector products located in Newton, Massachusetts selected Model N channel management as well. C&K Components is parts catalogue of tens of thousands of components. With Model N channel management, C&K will be able to get extremely accurate visibility into their business.

I'm encouraged by the result of Q1 FY16, and our increased confidence for FY16 and beyond.

Let me turn the call to Mark to discuss our financial results and guidance for the remaining of the year. Mark?

Thank you, Zack.

First, I would like to give an update on the progress of our stated goals of both increasing total revenues and increasing recurring revenue as a percentage of total revenue, as we shared on our investor and analyst day call on November 9.

As Zack noted in Q1, our recurring revenue as a percentage of total revenue 81%, a substantial increase from 56% in Q1 2015 and up from 67% of total revenues in Q4 of 2015. Also, total revenues were $24.5 million, an 11% year-over-year increase with a 2,500 basis point increase in recurring revenue as a percentage of total revenue. We feel we've made significant progress in both areas, and a very focused on sustaining strong execution. We will discuss Q2 and FY16 guidance in a minute.

Total revenues for the first quarter were $24.5 million, above our guidance range of $24 million to $24.2 million. This includes a deferred revenue haircut of approximately $200,000 related to the acquisition of Channel insight, which was completed within the quarter. This compares to $22.1 million in total revenue in the year-ago period. Within total revenues, license and implementation revenues were $4.6 million and SaaS and maintenance revenues were $19.9 million for the quarter. We expect license and implementation revenues to remain relatively flat to Q1 for the remainder of the fiscal year.

The mix of our revenue Q1 was 81% SaaS and maintenance versus 19% license implementation, a significant improvement of 56% SaaS and maintenance and 44% license and implementation in Q1 of FY15. As we've stated in the past, we're transitioning to SaaS and maintenance model, and the 81% achieved this quarter is by far the highest percentage of SaaS and maintenance revenue in Company history. This also represents a 60% increase year over year in SaaS and maintenance revenue dollars.

Before I move on to profit and loss items, I want to remind you that my commentary will be focused on non-GAAP results. A reconciliation of non-GAAP to GAAP results is provided with our earnings press release issued earlier today.

Gross profit for the first quarter was $12.7 million, compared to $13 million in the first quarter FY15. Similar to recent quarters, gross profits in this quarter included the impact of roughly $600,000 from the amortization of capitalized software that began upon the launch of our Revvy CPQ product. Overall gross margin in the quarter was 52% compared 59 % in Q1 of last year.

As we have discussed on previous calls and that the investor and analyst day, the transition to the SaaS model will impact gross margins in the short term. And we expect our overall gross margin to show further improvement as we migrate to a higher percentage of revenue in SaaS and maintenance revenues. As we've stated in the past, we do expect some quarter-to-quarter variability in gross margin, depending on mix of revenues and other factors.

Research and development expense was $4.9 million, compared to $4.1 million in the first quarter FY15. We are continuing to invest in our products. The Q1 result did include the capitalization of expenditures related to Revvy products on the order $500,000.

Sales and marketing expense was $7 million, compared to $6.1 million in the year-ago period. This increase was driven by our continued investment in sales marketing personnel and marketing program spend.

G&A expense was $5.2 million, compared to $4.5 million in Q1 of FY15. The year-over-year increase was attributable to the timing of the audit fees, and to the timing of expenses related to our annual company meeting.

Operating loss for the period was $4.4 million compared to a loss of $1.7 million in Q1 of last year, and better than our guidance of an operating loss of $4.6 million to $4.8 million. Net loss in the first quarter was $4.4 million, compared to a net loss of $1.7 million in the first quarter of FY15.

We produced a net loss per share of $0.16 based on a share count of 26.8 million shares, compared to a net loss per share of $0.07 based on share count of 25.3 million shares in the first quarter of last year. This was better than our guidance of a net loss of $0.17 to $0.18 per share. Adjusted EBITDA for the first quarter was negative $3.2 million, compared to negative $800,000 in the year-ago period.

We ended the first quarter with $70.4 million of cash and cash equivalents, down from $91 million at the end of the fourth quarter. The decrease in cash was due in part to the Channelinsight transaction which was closed early in the quarter, as well as the delay of some customer payments at December 31, which is the normal process of our customers retaining cash until early January. The Company's annual bonus was also paid in Q1.

We believe we are a target for the $72 million in cash balance at September 30, 2016, as we guided on our last call. At the end of the first quarter, our accounts receivable balance was $22.2 million, and our total deferred revenue was $27.7 million.

As mentioned previously, we believe our accounts receivable and deferred revenue balances are not a meaningful indicator of the business activity during any particular quarter. As the timing of our invoicing under our contract impacts these items, because we do not bill our customers up front for total contract fees.

For the first quarter, cash flow used by operations was $7.3 million. Which after adding CapEx of approximately $400,000 and capitalized software of $500,000 produces a negative free cash flow of $8.2 million. This compares to cash used by operations of $3.5 million in the first quarter of last year, which after adding approximately $700,000 of CapEx and capitalized software of $600,000 produce a negative free cash flow $4.8 million.

Similar to prior commentary in regards to our receivable and deferred revenue balances, there can be some quarter-to-quarter variability in our cash flow as it is impacted by the timing of invoicing under our contract. As we stated above, many of our customers deferred their year-end payments into early January, and we believe we are on track for our stated goal of $70 million to $72 million for our fiscal year.

Moving on, let me now outline our guidance for the second quarter of FY16, as well as our expectations for the full FY16. For our second quarter ending March 31, we expect total revenues to range from $25.4 million to $25.6 million. Non-GAAP loss from operations in the range of $6.8 million to $7 million, this would lead to a non-GAAP net loss per share in the range of $0.25 to $0.26 based on a weighted average share count of 27.2 million shares.

For the full FY16, we expect total revenues to range from $106.5 million to $107.5 million, or growth of 14% to 15% for the year as a whole. This is an improvement from our prior guidance from $106 million to $107 million.

Non-GAAP loss from operations in the range of $17.2 million to $17.5 million, an improvement compared to our prior guidance of $17.3 million to $1 7.8 million. Non-GAAP net loss per share in the range of $0.63 to $0.65, based on a weighted average share count of 27.2 million shares, an improvement compared to our prior guidance of $0.64 to $0.66.

The annual recurring revenue is now expected to range from $36 million to $37 million, up from our $34 million to $35 million as previously guided, an increase of 85% to 90% percent over FY15. Please note, we define annualized recurring revenue as a monthly recurring revenue at September 2016 multiplied by 12.

In summary, we continue to make progress against our stated goals of both increasing overall revenue and increasing recurring revenue. We have seen a 60% year-over-year increase in SaaS and maintenance revenue dollars versus Q1 2015, and 81% of our total revenues were SaaS and maintenance revenues. The revenue management market remains large and untapped, and we believe we are well positioned to execute on this tremendous opportunity.

I will now turn the call back to Zack.

Over the last two years, we executed well on our strategy to transform Model N into a cloud company, grow revenue, and transform our business model to SaaS and maintenance revenue. As such, we transformed every aspect of our business.

First, we changed the way we engage with our customers. Second, we transformed the way we develop and deliver product, as well as the way our customers consume this product. Last year, we announced Revenue Management as a service, which is a strategy and a solution to move our install base from the current on-premise deployment to software as a service.

Third, we released several new multi-tenant SaaS applications. Such as Revvy sales, the first CRM solution for semiconductor and component industry, and Revvy Revenue Management, the first salesforce native, enterprise grade, revenue management application suite.

Over the last several quarters, the results of our hard work have become more evident in our financial results. Both our fiscal year results and Q1 FY16 results are strong testaments to our success. More than 81% of our revenue is now SaaS and recurring revenue.

More recently, with evidence mounting that we are on the right track, I have been working closely with the Board to identify the right person to bring additional executive leadership to the Company to accelerate our very positive trajectory. We were looking for a CEO with deep enterprise software expertise, demonstrated leadership in driving product in go-to-market strategies, and a leader with a proven track record of scaling global businesses.

I am very pleased to announce that effective February 22, Edward Sander will join Model N as Chief Executive Officer. I will assume a new role as an Executive Chairman, focusing on Board development, strategy, and supporting Ed as the new CEO of Model N.

I am excited to add Ed as the to the CEO, as he brings a wealth of experience and key skills to our executive team. The Board and I have worked diligently to select an outstanding executive from a list of very competent candidates to take Model N to the next level. Ed joins Model N with deep knowledge in enterprise software, having held key roles in global companies such as NICE Systems, IntraLinks and SAP.

At SAP, Ed was a key member of the global marketing team that expanded SAP's back office ERP portfolio into the front office, driving a threefold growth of the CRM business. At IntraLinks, Ed led product strategy that resulted in new vertical expansion, and the creation of new horizontal applications, enabling IntraLinks to accelerate their IPO.

During his five-year tenure at NICE Systems [optimized] business, Ed held two executive positions. As Chief Product Officer, Ed drove the product transformation strategy that yielded three years of double-digit growth. And in his most recent role as the General Manager of its largest financial crime solution division, Ed delivered a year three of booking growth of over 30%.

The Board and I believe that his experience in each of these global leadership roles will be an asset to Model N. We are confident that out of his leadership, Model N will also reach exciting and new heights in the years ahead.

When we started Model N in December 1999, we dreamed of building the next great software company focused on our [built] core values with particular dedication to customer success. We have been focused on our mission to work closely with our customers, and to lead the market for revenue management. We are fortunate to have earned the trust of some of the world's leading brands to jointly innovate and deliver exceptional business results.

Today, Model N's solutions are widely used on a global basis by tens of thousands of users who execute quotes, price contracts, process rebate, and execute many other functions that comprise of the broader end-to-end revenue management life cycle. We are excited about the market opportunity for Revenue Management in FY16 and beyond. It is a very exciting time in our journey, as we have strong evidence that the businesses are ready to leverage Revenue Management as a competitive advantage, and our strategy to capitalize on this opportunity is working.

We are in an era of major technological changes, with the emergence of cloud computing, SaaS, social, mobile, and big data, to name a few. These technologies create both challenges and opportunities for businesses. And in particular, for the way companies are connecting, interacting, and engaging with their customers.

At the same time, enterprises and CEOs know they must create shareholder value by delivering financial results that are centered on top line revenue growth. These two mandates are converging quickly to create an opportunity for Revenue Management to become the catalyst to transform customer relationships into improved financial results by enabling enterprises to maximize revenue, and revenue growth.

Our strategy in FY16 is to invest to continue our leadership position in [large time] sales, high tech, capitalize on the unification of CRM and Revenue Management while completing the transformation of the Company's business model to recurring revenue. Model N had a successful FY15 and a strong start to FY16.

I believe that this is the right time for new leadership that will execute our strategy, scale the business significantly, and propel Model N to the next level. I remain thoroughly committed to Model N's long-term success, and look forward to working with Ed as the new leader of Model N.

With this, I would like to turn this to Ed to say a few words before opening for questions and answers for Mark and myself.

Thanks, Zack. I'm thrilled to be joining Model N as the CEO.

It is clear that Model N is dedicated to helping its customers succeed in their businesses. This core corporate compass along with its incredibly powerful software has put Model N in the pole position as a must-have partner for any company seeking to maximize its growth potential. Having worked in enterprise software for my entire career with companies of all shapes and sizes around the world, I understand the power and synergy found when you move beyond being just a vendor to a true strategic partner with your customers.

Model N has earned that coveted spot with its customers, and I believe this position us well for fantastic growth in the years to come. Bringing the power of CRM-squared to the market is a bold and visionary undertaking that takes a unique combination of entrepreneurial zeal, and laser focus for flawless execution. I've seen this DNA and passion in the Model N team, and I'm excited to lead them on their journey to see this vision realized.

I simply cannot wait to get started.

Thank you, Ed. It is great to have you on board, and Mark and I will take now questions.

Thank you.

(Operator Instructions)

Our first question comes from Nandan Amladi with Deutsche Bank, please state your question.

Thank you, good afternoon, and thanks for taking my question. Zack, you talked a lot about CPQ in your script.

As it applies to you specifically, how big do see this market and your ability to address it? And I ask this because Salesforce recently acquired SteelBrick, and there seems to be a lot of press about what is happening in the world of CPQ.

Absolutely. We focus on the revenue management market, and we believe that CPQ is a critical component of the revenue management market. Furthermore, when we spoke about the convergence of the CRM and Revenue Management, we see it as a critical phenomenon moving forward.

We believe that as companies focus right now on the number one strategic priority of most companies, which is the growth, we are going to see an era where CRM and Revenue Management need to come together in a very short period of time. And it is not about integrating them, it is about a much bolder concept of unification and really enabling our customers to do a digital transformation of their business.

Furthermore, we believe that that's a time where you really need also to unify the data that is centered around the customer. And that's data that is coming from the ERP, from the CRM, for Revenue Management, channel data and also syndicated market data that exists in certain industries. So we believe that we are in a prime position to be the catalyst to enable this vision of what we call CRM squared, it's about the exponential of the results.

CPQ is a critical component of that, and we are very pleased with the solution that we have. And as the two deals that we announced this quarter indicate, I believe that the division that we have is very much collated with the enterprise, [no] enterprise space. And I believe that there is a whole new set of customers in the market space that really merge between the ERP and CRM where Revenue Management can make a big difference.

Thank you. And a follow-up question for Mark perhaps. On the profitability roadmap, you raised your profitability guidance for the remainder of this year. In the market today, as you know, there seems to be a lot more pressure on companies with profitability that's still several quarters away. Are there any levers that you can adjust to maybe achieve profitability a little bit sooner?

Nandan, that's a good question. First of all, as you know, we exceeded Q1 and we raised our guidance for the year. As part of that, that's because of the strong visibility we have on the top line for FY16. And we discussed that at the analyst day, and again we reiterate the model that allows us to achieve that very strong visibility into the remaining three quarters of the fiscal year.

So we feel very good about where we are positioned as we move through the year, and we will definitely keep our eye on profitability. But we are very focused on moving towards that as we enter FY17.

Thank you. That's all for me.

Our next question comes from Brian Peterson with Raymond James, please state your question.

Hey, Mark, quick question. I wanted hit on the line one revenue.

But I know you guys came in a little bit lower than what we were modeling this quarter, obviously that was more than offset by the line two contribution, which is great news. But I'm just trying to understand, was there anything as far as that transition from line one to line two? Did that happen a little bit quicker than you expected in the first quarter?

Brian, thank you for the question. First of all, I want to reiterate what we spoke about at the analyst call, which was we have $7 million in contingent revenue related to go live last year. And in Q4 alone, we had four such projects which contributed to our Q4 revenue. As a reference point, we didn't have any of those deals, so these are perpetual licenses that went live in Q1.

Primarily as we talked about as a reference point a majority of our transactions were SaaS based last year. So as we look out for the remainder of this fiscal year, we expect our revenue for line one to remain relatively flat to Q1 for remainder of FY16.

Okay, thanks for the color on that. Just maybe a broader perspective, Zack, on what you guys are seeing out there in terms of sales cycles. Obviously, it's been a tough day in the markets for the last couple of days.

Has that had any change or any impact I'd say overall from a macro perspective on your business, whether it looks at -- looking at when deals are closing, opportunities out there, et cetera? I'm just curious if you guys are seeing what we are seeing? Thank you.

We have not seen any change in the market. We see the demand is actually a strong demand for a [cloud] for revenue management. And we see that the division that we have CRM squared and the unification of Revenue Management in CRM is very much aligned with where the market is going and with the activities.

We also have remember that when you look at our two core markets in life sciences and in high-tech, and in this market we're relatively active. The US government just released the final ruling for the AMP Rule which is a regulatory adherence to pharmaceutical companies, and it will require and assist the companies to think about their systems and the next generation. There is a variety of activities right now on the M&A that really drive them to drive their business, and to look at optionality and how they're going to structure the system.

And the solutions we have and the fact that we have right now the full line of the cloud and SaaS program are very aligned with the number one strategic priorities of these companies. So we do not see any change in demand so far in the market.

Okay, good to hear. Thank you.

Our next question comes from Tom Roderick with Stifel, please state your question.

Yes, Matt VanVliet on for Tom this afternoon, thanks for taking my question. First, I wanted to see if we have any update on some of the large pharma customers that were already looking at Revenue Management in the cloud and some of the Revvy products.

Just where those are from some of your marquee customers in terms of getting up to speed and live production? And then, in addition to that, what the upsell trends have been at the established customers with the cloud management product?

Absolutely. So we see the [gulf of] the cloud and SaaS move very, very rapidly from a concept to exploration to really becoming to be a mainstream. When you look at the Revenue Management, the cloud product that we started to release about a year plus ago, we have right now -- actually a vast majority of the customers on this product. So this gives you an indication about how fast the transformation has happened.

Also, when you look at the products that we put to the market as part of Revvy Revenue Management, the two deals that we announced today where it's basically CPQ and it's the multi-tenant SaaS platform. Or if you think that about the fact that we have right now 9 of the top 20 pharmaceutical companies managing every price that they have right now on the globe on a multi-tenant SaaS platform is something that nobody could predict two years ago that is happening. But through innovations, through with working with the customers, and bringing it to the market it's right now -- it's a reality.

We didn't have time to speak about this in the earning call, but we see a very different cycle to implementation and actually to closing the deals but there's a lot more rapid and much better. I want to speak about one customer that I can not name, one of the top five pharmaceutical companies. And we went live with them in the previous quarter in 108 countries if they directly -- from the go go, and now they are managing every price that they have on the globe in this multi-tenant solution.

Furthermore, this particular project was selected to receive the CIO award for this implementation, and is considered to be one of the best implementations that they had in the last year and now beyond that. When we look at this from a different angle, which is also a customer satisfaction, you can notice that across the board, customers that are on the cloud, on the SaaS product, are the happiest customers that we have and we think it is a trend that is going to move forward. And I think you can see it also in our financials, and I think it is going to be even stronger in the future.

And then following up on those implementations. Can you remind us just in general what the services piece is related to giving those customers live and in production, maybe just relative to the legacy on prem license deals that you were showing previously?

Matt, I think the response to that is, it really depends on the implementation. So as we've spoken a lot around perpetual licenses, we have some customers which take that across the enterprise. We have some customers that do it by business unit over time.

And so what we will call the attach rate, the perpetual license has varied over time. I would say from the staff size, that is also true. But if you do an apples-to-apples comparison to an implementation, we found that the SaaS implementations are faster and less expensive than if they had done it versus the perpetual licenses.

So basically if you look at what we have done since we moved to the cloud and the SaaS, we simplified the implementation, as Mark mentioned, we put the stronger methodology for that [software] implementation. And furthermore, we've partnered in more intensive way that we've been in the past in order to fuel the ecosystem around the Company.

This particular project that I just mentioned of the pharmaceutical company that went live in 108 countries at the same time, we are doing this with one of the prominent system integrators in the world. Same thing with this diverse technology company that selected a CPQ. So this also gives us an opportunity to accelerate the go to market and the services through a better partnership, and still grow the business at the same time.

Great, thank you.

Our next question comes from Sterling Auty with JPMorgan, please state your question.

Thanks. Hello, guys. Zack, one of the things that has been consistent over the last several years is that, at least in our discussions with some of your biggest customers, has been your participation or your role in closing some of the largest transactions in the Company.

So what I am curious about is, with you moving into Executive Chairman, are you going to still be involved in some of the larger customers as part of the sales process? Or over what timeframe are you phasing into just the focus areas that you mentioned as Executive Chairman?

Thank you. So when you look at my role, my role is not just the Chairman but I am an Executive Chairman, which means that I am still an employee of the Company. I have an office, and I go to work to support the mission of the Company and support Ed and the [management] position. And I and Ed look at this as a partnership to carry the Company forward.

Needless to say, Ed is the CEO of the Company. And as such, the buck stops there and he has full responsibility to drive business. But my passion and my commitment and my involvement in the Company is not changing. And I look at this as a way to take the Company to the next level. And, yes, I'm going to be involved in deals and in the customer and supporting the executive team as they take the Company to the next chapter in its evolution.

Sounds good. Thank you.

Our final question comes from Peter Lowry with JMP Securities, please state your question.

Great, thank you. Have you seen an evolution of customers understanding of CPQ?

Yes, we've seen that and I really believe that that's something that is working very well for Model N. And you have to remember, Peter, that Model N has been doing quoting and pricing and (inaudible) configuration for almost 15 years. And as you know, we have companies that have thousands of people, both direct and in the channels that every day they configure the quote and the price and no solution.

So we understand this beyond the obvious software, the CPQ, really understand that in order really to unify CRM and Revenue Management that CPQ is the linchpin. But there is farther more than this. So if you think about the combination of the global price management, CPQ, contract life cycle management and the rebate and the strong intelligence, all of this capturing basically the process but also the information that enables you to translate what you do from information into insight into action and into revenues, we think that this vision is very much aligned with where the world is going.

When you look at some of the deals that we announced an others that we didn't announce, it's very much aligned with how the thought leaders are getting there. And we believe that it's just a matter of time where the world is going to realize that it is going to be absolutely the single most important thing that they need to do in order to drive revenue and revenue growth. So we are very excited about it.

Okay, great. Thank you.

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation, you may disconnect your lines at this time.