Model N Inc (MODN) 2022 Q2 法說會逐字稿

Good afternoon, and welcome to Model N's Second Quarter of Fiscal 2022 Earnings Conference Call.

(Operator Instructions)

As a reminder, this conference is being recorded. With that, I would like to turn the call over to Carolyn Bass, Investor Relations.

Good afternoon. Welcome to Model N's Second Quarter Fiscal 2022 Earnings Call. This is Carolyn Bass, Investor Relations for Model N. With me on the call today are Jason Blessing, Model N's Chief Executive Officer; and John Ederer, Chief Financial Officer. Our earnings press release was issued at the close of market and is posted on our website. The primary purpose of today's call is to provide you with information regarding our second quarter of fiscal 2022 performance and offer a financial outlook for our third quarter and fiscal year ending September 30, 2022.

The commentary made on this call may include forward-looking statements. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may differ materially. Please refer to the risk factors in our most recent 10-Q filed with the SEC. In addition, during today's call, we will discuss non-GAAP financial measures.

These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, GAAP results. Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in the earnings press release issued today, which is available on our website. I encourage you to visit our Investor Relations website at investor.modeln.com to access our second quarter press release, periodic SEC reports and the webcast replay of this call. Finally, unless otherwise stated, all financial comparisons in this call will be made to our fiscal year 2021 results.

And with that, let me turn the call over to Jason.

Thanks, Carolyn, and good afternoon, everyone, and thank you for joining our call today. Our second quarter results outperformed across the board, exceeding all key guidance metrics, including total revenue, subscription revenue, professional services revenue and adjusted EBITDA. We also had another very strong bookings quarter, which when combined with our Q1 performance positions us well for a strong second half. And as previously discussed, we are targeting to exit our fiscal year at a 20% SaaS ARR growth rate as we anticipate this key metric to accelerate in the second half of the year.

As you will hear when John gives guidance, we are confident that we are in fact on track to hit this important milestone. In Q2, we closed SaaS transitions with 2 of the largest pharma companies in the world. As we have shared on our recent calls, we expect 2022 to be a pivotal year in SaaS transitions as the conversion of remaining on-premise customers to the cloud accelerates. I am also pleased to share that we're ahead of our first half internal plan for SaaS transitions, which is one of the growth levers driving upside this year.

Even more importantly, we are seeing a meaningful amount of our bookings this year coming from non-SaaS transition deals, which bodes well for our future. Given the success we are seeing with SaaS transitions, we also continue to see our maintenance decline at an accelerating rate compared to recent levels. Declining maintenance is a seminal event in any on-premise to SaaS transition story, and we view this as a very positive trend as Model N completes its evolution to a SaaS business model. Next, I'd like to share some quarterly business highlights. During the quarter, we signed SaaS transitions with 2 of the largest pharma companies in the world, Sandoz and Pfizer.

Sandoz, one of the largest generic drug manufacturers in the world is a subsidiary of Novartis, who you may recall, started their SaaS transition last year. The positive momentum on the Novartis project influenced the decision to start the Sandoz project, and we are very excited to partner with both companies on their digital transformation. The decision to launch Sandoz' SaaS transition was based on a rigorous business case that outlined the following benefits: to take advantage of Model N's latest analytics to improve contracting strategy and overall profitability; to always be on the current, most secure version of Model N with the latest compliance updates; and to adopt the industry's best-in-class revenue management solution to support future growth, while allowing Sandoz to be nimble in today's dynamic regulatory environment.

The Sandoz and Novartis teams have been long-time partners with Model N, and I am thrilled about our exciting future together and being personally involved in these projects. I am equally as excited to kick off Pfizer's SaaS transition, another long-time customer that is also going through a digital transformation to further improve patient outcomes. Once their SaaS transition is complete, Pfizer will also benefit from improved system security and performance, lower total cost of ownership and access to the latest innovation and compliance updates. And speaking of innovation, we have been working very closely with Pfizer to build a new product to address the growing number of states that are implementing unique requirements around drug launches and price transparency.

I am pleased to announce that Pfizer is already live on version 1 of the product and partnering with us on the next version that will come out later this year. State Price Transparency Management is a great example of how we leverage our technical and industry expertise to rapidly build and deploy a new product. And we continue to see our pipeline grow for this new product as more and more states roll out new legislation. On the High Tech front, in the first half, we saw strong execution driven by new logos and great upsell activity by our customer success team. High Tech has exceeded my expectations in the first half of this year.

Also, a large portion of our High Tech bookings in the first half were driven by our customers who are starting to invest in their infrastructure at a more healthy rate. If you recall, High Tech had a bigger slowdown during the pandemic than Life Sciences did. So I'm pleased to see momentum continuing to build in this important part of our business. Turning to professional services. Our team continues to deliver substantially all of our projects on time, on budget and at best-in-class margins.

This delivery excellence is also playing a key role in our sales cycles, given the multiple proof points we have on predictable, rapid time to value for our customers. I expect continued strength in our services business throughout this year as the team has built a substantial backlog. We also have a healthy portfolio of projects in flight as our services teams continue to lead Model N's transformation to a cloud company and help our customers with their own digital transformations.

We have also had several successful go-lives recently, and I thought I'd highlight one of them for you. Kyowa Kirin or KKI, is a new logo we signed within the last year that is already live and receiving benefits from Model N. Headquartered in London, KKI is a rapidly growing specialty pharmaceutical company with 16 locations in Western Europe. Their implementation involved configuring our global Price Management solution to handle 30 products sold in 41 countries using 7 different price types.

With one centralized platform and a unified process, KKI is realizing several benefits. Model N allows them to assess the impact of pricing decisions throughout a drug's life cycle and allows them to execute pricing strategies more effectively with global collaboration. They can now also visualize trends related to pricing and approvals across their product portfolios through Model N's analytics. KKI Is another great example of Model N winning a new logo and successfully guiding the customer through a rapid implementation. Our Business Services team also continues to validate our investment thesis of increased TAM by adding new logos as well as executing on customer expansions.

Now that we've fully integrated the Business Services team, we are seeing continued growth in our pipeline and strong competitive wins. I'd like to highlight one of the Business Services wins in the quarter at Amylyx. Amylyx is a pharmaceutical company based in Cambridge, Massachusetts, that is dedicated to the development of innovative new therapies for neurodegenerative diseases. This is a perfect example of our ability to attract a smaller pre-commercial company with our Business Services offering.

Amylyx was in the process of seeking FDA approval for a drug to treat ALS and selected Model N Business Services for their revenue management and compliance needs. Our solution will assist Amylyx with enrollment in and processing of government programs, including government pricing, Medicaid, TRICARE and 340B. Amylyx selected Model N due to our deep expertise and track record of assisting emerging pharmaceutical manufacturers with successful product launches. In March, we held Rainmaker, our 18th Annual Customer Conference. This event is a thought leadership and educational conference and brought together more than 700 executives and industry experts from around the world.

At Rainmaker, I outlined our future vision of the company, something we're calling Model N 3.0. This is the next evolution of Model N that will allow us to meet the dynamic customer and industry needs and expand our solution portfolio around 3 core offerings that all complement each other. Model N 3.0's primary business will continue to be cloud-deployed software, and we will continue to look for ways to expand our footprint through building new offerings, M&A and potentially partnerships. The second dimension of Model N 3.0 involves building a meaningful data and analytics offering.

This represents a compelling new opportunity for us and will be a strong complement to our software solutions. I think we are uniquely positioned to provide sophisticated, industry-specific analytics because of our strong domain expertise and unique proprietary data set gathered from years of transactional processing for our blue-chip customer base. The third and final dimension of Model N 3.0 will be expert services. Expert services will grow into a portfolio of software-enabled services that are designed to help customers address the unique complexities of their industries and be more effective at leveraging our software and data offerings.

The acquisition of Deloitte's Business Services team was a signature acquisition to accelerate this part of the Model N 3.0 vision. It is our belief that Model N 3.0, with a more strategic solution portfolio and an amazing engaged team, will have the ability to drive sustainable, profitable growth and will represent a compelling differentiated investment overtime. Also at Rainmaker, we rolled out our annual state of revenue research report. This report surveyed over 300 senior executives with direct responsibility for revenue management at companies in Life Sciences and High Tech.

The insight from this report can help investors understand some of the current trends that we're seeing in our vertical markets and why we believe that we are well positioned for the future. The key takeaways are that revenue leakage and compliance continue to be top of mind, and these are the problems that Model N solves. In Life Sciences specifically, the headline is that regulatory compliance at state and federal levels is a concern for the vast majority of executives. In fact, nearly 2/3 of pharmaceutical executives expect that managing compliance will get even more difficult in 2022.

In support of these findings, and as we've outlined on our recent earnings calls, our new State Price Transparency Management solution is receiving a lot of interest from customers and prospects. State Price Transparency Management is the industry's first software solution that enables pharma companies to automate State Price Transparency compliance. The full state of revenue report, which includes a significant amount of additional detail as well as replays from our Rainmaker customer event, are available on our website. In closing, I'm proud of how our team has performed in the first half of this year.

We are executing well across all growth levers, including SaaS transitions customer expansions, new logos and international. I am also very proud of how our team continues to stay focused and execute in a very dynamic global environment. This dedication and strong execution resulted in an excellent first half and puts us in a strong position to accelerate our growth and profitability as we exit 2022.

I'd now like to turn the call over to John to discuss our Q2 financial results and provide an update on guidance. John?

Thank you, Jason, and good afternoon to everyone on the call today. As Jason noted, we had a strong second quarter, exceeding all of our guidance metrics. Revenue upside was driven by both subscription and professional services, while our strength in adjusted EBITDA and non-GAAP EPS was driven by the strong revenue performance and continued good cost management. Our strong bookings performance over the first half has improved our outlook for the year, and you'll see that when we discuss our guidance later in the call.

Turning to the financial results for the second quarter. Total revenue grew 11% to $53.3 million, which exceeded the top end of our guidance. Subscription revenue increased to $38.2 million, also exceeding the top end of our guidance range. And we saw upside in professional services revenue, which grew by 23% year-over-year to $15 million. Looking at profitability for the second quarter. Total non-GAAP gross profit was $31.9 million with a gross margin of 60% versus 57% in Q2 last year. Non-GAAP subscription gross margin improved to 67% versus 66% in Q2 last year. And non-GAAP gross margin for professional services was very strong again in Q2, hitting 42% versus 29% a year ago as this team continues to execute extremely well.

Operating expenses for Q2 were lower than expected due to the timing of some hiring and other investments. And as a result, adjusted EBITDA for the quarter was $6.6 million, well ahead of the high end of our guidance of $4.5 million. Adjusted EBITDA margin was 12% for Q2 versus 6.3% a year ago. And Q2 marks the fourth consecutive quarter that our EBITDA margin has been back in the mid-teens.

Finally, non-GAAP net income was $4.9 million or $0.13 per share, which was $0.05 ahead of the high end of our guidance of $0.08 per share. On the balance sheet, we ended the quarter with $170.5 million in cash and equivalents, which was up $15 million from the end of December on very strong cash collections.

I know that some of you look at calculated billings, which is typically defined as revenue plus the sequential change in deferred revenue. For Q2, calculated billings were up 5% year-over-year, which is in stark contrast to the strength we are seeing in RPO, which I will discuss in a moment. Calculated billings can sometimes vary depending on invoicing cycles and other factors. We typically focus on RPO, which is a GAAP metric and a measure of our total backlog as we believe this is a more meaningful indicator of the underlying health and predictability of our business.

Turning to RPO or remaining performance obligations. The total balance was $284.6 million at the end of Q2, representing an increase of $81 million or 40% year-over-year. The current portion of our RPO balance was $123.4 million, which grew by $15 million or 14% year-over-year, and the non-current RPO was $161.2 million, an increase of $66 million or 68% year-over-year. The high growth in RPO reflects the strong bookings performance over the first half of this year and provides better visibility for future contracted revenue.

As a reminder, during the year, we continue to expect strong growth in SaaS revenue to be offset by declines in maintenance revenue as cloud migrations accelerate. To give you a better indication of our success in transitioning from on-premise to SaaS, we have begun disclosing SaaS ARR. This represents the annualized value of our daily subscription revenue for the most recent quarter. As we've noted on our last couple of earnings calls, we anticipated a more challenging quarter in Q2 from a comparison standpoint. This did transpire in the second quarter as we finished with $89.9 million in SaaS ARR, which was up 17% on a year-over-year basis.

While our trailing 12-month net dollar retention on SaaS was 116%. Both of these numbers were slightly below recent trends, but again, as we previously commented, we expect SaaS ARR growth to accelerate over the second half and exit the year at our 20% growth target.

Now let me turn to our guidance. For the third quarter, we expect total revenue in the range of $54.5 million to $55 million; subscription revenue to be in the range of $39.2 million to $39.7 million, adjusted EBITDA to be in the range of $7 million to $7.5 million and non-GAAP EPS to be in the range of $0.14 to $0.16 per share based on a fully diluted share count of approximately 37.2 million shares.

For the full year of fiscal 2022, we are increasing our total revenue range to $215.5 million to $216.5 million, with subscription revenue expected to be in the range of $156 million to $157 million. We are also raising our outlook for adjusted EBITDA to a range of $27.5 million to $28.5 million, generating non-GAAP EPS in the range of $0.56 to $0.59 per share based on a fully diluted share count of approximately 37.3 million shares.

In summary, I'm pleased that we've been able to navigate this transition and make an acquisition, all while maintaining strong profitability, generating good cash flow and meeting or exceeding expectations.

Running a responsible, balanced, profitable growth business is very much a part of our DNA. While we're in the midst of this transition, a good proxy for our future progress towards the Rule of 40 is to look at SaaS ARR growth plus adjusted EBITDA margin. Looking at our targeted SaaS ARR growth of 20%, plus the implied adjusted EBITDA margin from our FY '22 guidance today would put us at 33%, which is illustrative of our continued profitable growth objective.

Now I'll turn the call over to the operator for any questions. Operator?

(Operator Instructions)

Your first question comes from Ryan MacDonald with Needham & Company.

This is Matt Shea on for Ryan. Wanted to touch on Model N 3.0. We learned at Rainmaker that 3.0 will allow customers to create a mix and match and ultimately create a hybrid offering. So curious what kind of opportunities this creates that you maybe couldn't go after before? And then is it fair to expect that these hybrid clients start small and then you guys can upsell the modules over time?

Yes, Matt. So by hybrid, I assume you mean being able to consume revenue and compliance management through our software as well as Business Services. And interestingly enough, part of our investment thesis with Business Services was really just -- it was primarily to go after new logos. But what we have seen -- and we've signed a few deals with customers now where they didn't use Model N in the business, for things like government pricing, as an example, Medicaid claims processing and did not have the expertise in-house. And so they found Business Services to be very attractive.

And so when we talked about that hybrid environment, again, it really reflects the fact that we have such a broad set of offerings that we can tailor to a customer's specific needs and their business requirements and how they want to consume our offerings.

Got it. That's helpful. And then appreciating that the Business Services helped expand your TAM in part due to those kind of pre-revenue biotechs. We're starting to see some slowdown in biotech funding relative to some of the 2021 peak levels. Just curious if that poses any risk for the Business Services segment? Or if that tail is still long enough that whether there's a slowdown in funding or not, it's kind of immaterial relative to the broader opportunity in front of you?

Yes, it's more of the latter. We've actually been seeing our pipeline accelerate in business services, and I think it's more reflective of how big and untapped and underserved that market is. So while certain areas may be slowing down a bit, there's still a broad part of that market that continues to invest. And Amylyx, who I cited in the script, is a great example of a customer that we actually started working with during the FDA approval process and then they signed a big customer when they got their stamp of approval and started selling.

Next question comes from Joe Meares with Truist.

At Rainmaker, you talked about some new products, including advanced testing services and Ngage. I would love to hear about any early customer feedback there if those products are available for customers yet?

Yes. The advanced testing services are products that we have available in our -- leveraging in the marketplace today and just about every single one of our customers uses those services to help deal with the stringent internal audit constraints around consuming a new cloud release. So the advanced testing service has actually been a major enabler of some of our larger SaaS transition.

And Ngage is designed -- it is a product that's on the road map, and it's a product that's really designed to help users better navigate the system, consume new features and functions more quickly, and it's something that we'll be rolling out next year.

Helpful. And then just as a follow-up. One of the trends you talked about at Rainmaker affecting High Tech was the ongoing supply constraints. Just wondering if you could talk about how your -- which of your products help here if you're seeing any increased demand in this space because of what's been going on in the supply chain?

Yes. Certainly, our Channel Data Management product helps High Tech customers with supply chain constraints because they want to make sure that they are -- have the right incentives in place to push their scarce products through the most profitable, most reliable channels. So we have seen an uptick in the High Tech business, as I said, and Channel Data Management is one of those products that solve the very top of mind issue for these companies.

Next question, Chad Bennett with Craig-Hallum.

John, maybe first one for you. Just -- can you give us a little bit of insight, the dynamic on RPO between CRPO and noncurrent? And just kind of that delta there, whether in terms of deal ramps or deal structure and maybe what to expect as much as you care to share in upcoming quarters with respect to CRPO?

Yes, sure. No, happy to. We actually saw a solid growth on both metrics. But obviously, the total RPO number at 40% year-over-year outshined a bit. And what I would say there is that we actually look at both. The current RPO gives us a great visibility in terms of our next 12 months revenue, particularly on the subscription side of things. So that's an important metric for us.

And then on the total RPO side, that really goes to the overall health of the business, and what we're seeing from a bookings standpoint. One of the big drivers behind that is the SaaS transition deals. Those tend to be larger deals and longer term in nature. It's not uncommon for those to be 3 to 5 years in length. And so those contribute quite a bit to the total number and then roll into the current number each year.

So should we see that delta, John, kind of compress and maybe where the CRPO accelerates a bit, especially as you kind of get to the second half of the year into next year and maybe the deal ramps are more of a tailwind?

Yes. I would say, maybe over time, you might see those numbers converge, those growth rates converge a little bit. The way, I guess, I would think about the total RPO number and the long-term RPOs each year, that, in effect, backfills your current RPO. So as you consume current RPO over the next 12 months, you've already got bookings in place that will fill in for that number that you consume each year. And so that's why I think both are important. The total RPO number in that long term gives us a pretty good runway of visibility for the next several years.

Got it. And then maybe one follow-up. I think it was Jason, but -- maybe it was John. Just in terms of -- you talked about net expansion. And I think you said you're seeing more net expansion from kind of cross-sell, upsell or add-on products from a materiality standpoint versus kind of like-for-like migration dollars. Can you just talk about kind of how significant that's been over the last few quarters? And maybe any type of improvement, I guess, maybe that's the right or wrong word in terms of cross-sell, upsell efficiency into the go-to-market?

Yes, Chad, I'll take that. So as I've said on past calls, SaaS transitions have been a great catalyst to get back in front of our customers and retell the model and the story. And even more importantly, plan out, not just the SaaS transition, but what are the other things that customers can consume from Model N to drive value.

And I think what's become a really encouraging trend out of those discussions is we have a number of products that were not contributing in a material way to our bookings 18 months ago that now are making up a significant part of our bookings in addition to SaaS transitions.

And so when I look back over the last couple of quarters, it's things like State Price Transparency, it's things like our global products, global Price Management, Global Tenders, Validata, Business Services, some of the enhanced support offerings that we're able to bundle in with the SaaS contract. So like I said, it's been a great trend in the business that these SaaS transitions have been a catalyst to get back in front of customers.

And as you're probably thinking, they just rattled off that list, we have a lot of different things that we can sell to our customers. And that doesn't even include just moving current Model N footprint into other divisions. So there's a nice dispersion across all of those different opportunities we have as we look at what we're selling into the base.

Next question, Joe Vruwink with Baird.

I'll maybe stay on the same topic, a portion of your bookings that come from non-SaaS transition deals, can you just maybe elaborate on how that impacts the financial model maybe differently than Model N has been seeing? I think we've been in a period of time where you've had success signing really big deals, but multiyear deals, some deals that have ramps are what you just described may be more prone to near-term activation. So it kind of creates this more near-term certainty on top of the longer-term tailwinds with the transitions.

So Joe, could you restate the question?

Yes. Basically, I guess the gist of it is if you get a year of bookings where it's not so heavily reliant on SaaS transitions to the earlier point about its -- the other products and the upsell, cross-sell that seems to be driving good activity here. How that might influence your I guess, execution and your more near-term growth profile if these are the types of products that might be prone to a quicker activation ultimately?

Yes. Okay. That's really helpful, Joe. Thank you. Yes. So I guess there's a couple of things that I would say there. And some of this goes back to when I started at the company. We have a multi-million dollar -- $70 million bogey that we've been going after with SaaS transitions. And we've talked about the white space in our customer base, and this was even pre some of the new products that we have being -- 3 to 4x that. And the fact that we have that unique opportunity, but we're staffed up from a go-to-market or a selling motion perspective to capitalize on it, I thought was an issue.

And so what we're seeing now with some of these results is that multiyear effort and bifurcating our sales force around hunters and farmers getting more high-value products for those themes to sell. And as you point out, certainly, when you get a customer to the cloud, being able to turn on a new incremental product, both in terms of the effort to sell it and implement it goes down pretty dramatically. So yes, I would characterize some of that nice uplift that we're getting from cross-sell, upsell as just a byproduct of how we organize and go into market and what happens when you transform into a cloud company.

Okay. Okay. That's great. It would seem that your services team is running at a really high utilization level. Are you perhaps running up against maybe the ability to hire influencing how you think about growth going forward? And can you maybe just address the broader kind of -- there's huge demand for -- very specifically trained service professionals for the Life Sciences space. How do you kind of go about competing or how your recruitment plans have been going?

Yes, that's also a good question, Joe. So we knew last year coming into this year was going to be a pivotal year in SaaS transitions. And so there were 2 things that we did ahead of that: one, we did hire a bit ahead in our services organization to make sure that we have the right capacity to deliver what is a very robust backlog of business; and then the second thing we did is we cultivated, I would characterize it as, 3 or 4 SI partnerships that could see the path forward. They're pretty significant Model N practices during the SaaS transition period and then some of the additional work that we were just talking about cross-sell and upsell.

And it's really been that combination of our own hiring and the rate team we have as well as some very strong partnerships with some of the SIs in the field that allowed us to fulfill that work. I will say this, we'd probably lean a little more on SIs as some of these bigger customers and bigger projects work their way through the system. But I do think we've got good flexibility with the SI network to deliver.

(Operator Instructions)

Your next question comes from Brian Peterson with Raymond James.

So first, just on the cross-sell. There's obviously some new products that are driving bookings. I'd be curious, for a lot of these products, is it more greenfield than what you guys have historically done? I know a lot of that's been transitioned. And thus, like are we not going to see maintenance declines as it relates to some of these deals? Or I just -- I want to make sure I understand like what's in place for your customers as you kind of broaden that SaaS adoption across the portfolio?

Yes. The maintenance phenomenon is really related to SaaS transitions of core footprint that was out there on-premise. Things like State Price Transparency, some of our global products, Business Services, of course, and then some of the enhanced services tied to SaaS, there is no legacy product that customers are moving from. So it is greenfield, I guess, to use your terms and doesn't have any maintenance that's deprecating along with it.

Got it. Maybe just on the services side. I know you guys made some announcements out at Rainmaker. As we think about like a fully transitioned model over to the cloud, what's the right way to think about services' intensity with that? Because obviously, the domain expertise is there. I'm just -- maybe there isn't as much implementations. I'm just curious how to think about kind of the long-term subscription versus services mix.

Yes. We certainly -- we haven't guided on kind of that long-term model, but I can tell you anecdotally, what we've seen in some of our net new customers that we've signed and implemented, the services attach rate is more like $0.75 to $1.25 of subscription. And it just kind of depends on the customers' requirements, complexity and footprint. But much more in line of what you would see in our native SaaS company.

Next question comes from Matt VanVliet with BTIG.

Wanted to dig in a little bit in terms of what you're seeing from potential price increases or other sort of inflation hedging type of mechanisms that you might have, both in your contracts and as you negotiate SaaS contracts or expansion deals, kind of what levers you're trying to pull? And what has been the customer reaction thus far?

Yes. This is John. I'll start in on that. So from a -- I guess, from a more broader perspective and inflation in general, this hasn't been a huge factor for us to date on the expense side of things where we might see a little bit of impact is really just on the employee costs, although I would argue we've been in an inflationary market for tech talent for several years now.

So -- if not decades. So I think that's been kind of par for the course. In terms of some of the things that we're doing from a customer standpoint, we have been able to push through price increases, and we're actually getting good traction on renewals in that regard. So that's been a positive. And so net-net, I would say that inflation has not been a concern. And in fact, we've been able to benefit from it a little bit.

And I would add on to what John said, we also did recently nudge up our Professional Services rate card as well.

Okay. Very helpful. And then I guess, exiting Rainmaker, how would you judge it in terms of new business development and overall customer relationship management there? And kind of within that, what has been the feedback of the 3.0 strategy? Has there been any level of confusion or just sort of additional chance for educating customers around kind of what the long-term strategy looks like there? Anything coming out of there that would be really helpful.

Yes. So the 3.0 strategy, I would say this is something that we've been road-testing with a number of our large customers over the last year. And in fact, some of the strategy work we did around this involved direct customer feedback. So I think there's been a level of excitement with customers, particularly given that most of our customers view us as a very strategic partner in some of these key areas. And so to have a broader portfolio of services that they can consume from one trusted adviser seems to resonate well with them.

So as I mentioned in one of the earlier questions that was asked of me as well. Small customers, big customers, business services and that value prop has resonated well, probably more surgically at the upper end of the market, but as a broad-based solution at the mid-market. So there's great validation of this strategy. And as I said, it was a collaborative effort with some of our largest customers. I personally was very pleased with the turnout at Rainmaker this year. I believe the final tally we published was over 700 non-Model N attendees. And particularly given how dynamic the market is right now around some of these regulatory changes, that was a big topic of discussion.

And both new prospects as well as existing customers the sessions that were by industry leaders like came in on the State Price Transparency side of things. Those were very well attended. And our sessions that we did on our own products to address those issues were oversubscribed. So I was very pleased with attendance and some of the engagement on these key topics. And that was a virtual show.

So I guess as a trade-off, maybe you get a little bit better attendance, but harder to touch people. But we are starting to get back on the road again. Our customers are getting back in the office. And we've got a busy summer ahead of us getting out and visiting people that we haven't seen in potentially a couple of years.

We have time for one more question, Joe Goodwin with JMP Securities.

Congrats on the quarter. Just wondering what was the percentage of ramp deals in the quarter?

Percent of ramp deals was actually lower than it was pre-pandemic. So -- as we've talked about, Joe, we use that as a tool to keep things moving, both on sales and services during the pandemic. And we've said that we're not really using them as much or if at all. And so it was lower than pre-pandemic levels and something that I would say is a footnote in the Model N pandemic stories at this point.

Understood. And then on current RPO, just the sequential decline from 1Q, anything to note there, John? Or any comments?

No. I mean the only thing that would be playing into that is just the timing of contracts and how they're rolling through the model, particularly the maintenance. And so maintenance, we see a lot of renewals around our fiscal year-end and around the calendar year-end. And then that bleeds off over the course of the year. And so that's probably the biggest factor.

Thank you. I will now turn the call over to Jason Blessing, CEO, for concluding remarks.

Thank you, operator. I wanted to end today's call on a personal note. I just celebrated my 4-year anniversary at Model N and just wanted to share a few things. First of all, this is by far the best job I've ever had. Our corporate culture and our core values are absolutely second to none, and I have worked at some amazing companies over my 25-plus years in enterprise software. Second, it has been an absolutely amazing experience to work with companies that are our customers, companies that are truly improving the quality of human life, something we've certainly seen play out in spades over the last couple of years.

And then finally, it's been really rewarding to take my 15-plus years of working at native SaaS companies and apply that expertise and work side by side with an amazing team here at Model N to drive the business model transition that are now coming out the back side of. And it has just been incredibly rewarding to build such a great, durable company, but still got many great years ahead of it.

So again, thank you, everyone, for attending our call, and have a great night.

This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.