Q1 2024 Model N Inc Earnings Call
Participants
Carolyn Bass; IR; Model N Inc
Jason Blessing; CEO; Model N Inc
John Ederer; Chief Financial Officer; Model N Inc
Ryan MacDonald; Analyst; Needham & Company, LLC,
Joseph Vruwink; Analyst; Robert W. Baird & Co. Incorporated
Adam Hotchkiss; Analyst; Goldman Sachs Group, Inc.
Craig Hettenbach; Analyst; Morgan Stanley
Samad Samada; Analyst; Jefferies
Aaron Kims; Analyst; JMP Securities LLC
Presentation
Operator
Good afternoon and welcome to Model N conference call.(Operators Instructions) As a reminder this conference is being recorded. With that, I would like to turn the call over to Carolyn Bass, Investor Relations. Please go ahead.
Carolyn Bass
Good afternoon. Welcome to model and first quarter of fiscal 2024 earnings call. Carolyn Bass, Investor Relations for Model N. With me on the call today are Jason Blessing, Model N's President and Chief Executive Officer; and John Ederer, our 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 first quarter performance and offer a financial outlook for second quarter and fiscal year ending December 31, 2024.
The commentary made in 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 Form 10-Q filed with the SEC. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not a substitute or in isolation from GAAP results. Reconciliations of non-GAAP metrics to the nearest GAAP metrics are included in the earnings release issued today, which is available on our website.
I encourage you to visit our Investor Relations website at investors.modeln.com to access our first quarter of fiscal 2024 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 2023 results. And with that, let me turn the call over to Jason.
Jason Blessing
Thank you, Carolyn, and welcome to our call today. I am pleased to report that our first quarter results exceeded guidance for total service revenue and adjusted EBITDA. We also generated over $20 million incremental cash flow from operations in Q1 versus the first quarter of last year. This metric is another proof point that demonstrates the overall health of our business and the progress we've made on our business model transformation.
Our Q1 SaaS ARR grew by 16% year over year, while SaaS net dollar retention was 115%. As we said on the last two calls, we faced tough comparables this year in the first few quarters when compared to last year's record-setting SaaS metrics. That said, we have expect our SaaS growth metrics to improve as we exit the year and we are pleased with our start to 2024.
Next, I'd like to share selected business highlights from the quarter. I am encouraged by Q1 because we signed one of our last remaining large SaaS transitions, but more importantly, we saw a meaningful contribution from our long-term growth drivers. The bookings mix included new logos and numerous customer base deals, including transactions involving recently released products. I was also pleased to see a strong quarter from business services.
In Q1 our new logo team posted a strong start to the year. In Life Sciences, I am pleased to announce a marquee win with the Society of Bayer Pharmaceuticals, a top 20 global pharma company that is currently going through its own transformation. Bayers broad portfolio includes many world-famous products that have shaped their iconic brand.
This was a competitor of wins and includes our full suite of cloud offerings, including all commercial government pricing and Medicaid solutions. Bayer saw a best-of-breed solution to address their revenue management challenges, which included many manual and outsource processes. Additionally bears looking to establish a robust platform to support multiple upcoming product launches model and will be instrumental in supporting these new launches while also delivering several operational improvements resulting in a strong ROI when the system is fully deployed.
In Life Sciences we also continue to see solid growth within our customer base, led by new products that we're releasing Novartis of prominent model in SaaS customer gains in support of their focus on operational excellence. Engaged is Model N's innovative in application guidance tool, specifically designed to help users navigate the system while also helping to enforce key operational and compliance controls.
Engage also provides real-time analytics to customers and Model N help identify where users are having challenges with system usability. This helps us to improve our user experience and empowers customers to streamline user proceeds. The adoption of engage at Novartis demonstrates this new products ability to help companies be more successful with their model and investments while also improving overall operational excellence.
Also in Q1, Apellis Pharmaceuticals selected global launch excellence to augment their existing deployment of Model N's global pricing management. Apellis is a global biopharmaceutical company that develops transformative medicines for people living with rare retinol and neurological diseases. Model N's global launch excellence module will allow Apellis to create complex launch sequences by combining accurate price data volume forecast and optimization algorithms to ensure that their therapies efficiently reach the patient populations that need them most.
Turning to business services. During the quarter, we signed several customer expansions. one I'd like to highlight is that Madonna modernity expanded their business services consumption to handle their membership, contract administration and rebates processing to support their growing business. Modernity is also a case study on how business services allows us to engage with an emerging pharmaceutical company and quickly provide fully outsourced revenue management to enable them to deliver their life changing products to the world.
Another terrific example of business services enabling a growth company is at United Therapeutics. United Therapeutics is an existing model end customer and needed help dealing with the increasing complexity of state price transparency regulations to address this need. This customer selected our newly released state price transparency management business services offering.
This solution will enable United Therapeutics to accelerate their path to compliance with price clients' needs will be properly manage regardless of the changes in regulations. Moving on to SaaS transitions. During the quarter, we signed one of our few remaining SaaS transitions with Teva Pharmaceuticals. Teva is the global leader in generic drug manufacturing supplying affordable medicines to nearly 200 million people across six continents every day.
This deal extends the 20 plus year revenue management partnership between our two companies. Our SaaS platform will allow tablet to more easily take advantage of innovations and to operate more efficiently while maintaining compliance. Turning to high-tech, this segment continues to show green shoots and posted a strong Q1 that included customer expansions into new logo wins.
The first new logo is Taiwan Semiconductor, a multinational semiconductor design and manufacture that also owns the world's first dedicated semiconductor foundry. Taiwan Semiconductor is planning to grow their business globally, especially through their distribution channel, but they are limited by a combination of manual and homegrown systems.
They needed a platform to build a consistent global approach to pricing floating and point-of-sale integration. After it a thorough evaluation, Taiwan Semiconductor chose Model N's channel data management and revenue cloud to automate these key processes to support their future growth. We also signed another new logo and high tech with a company that designs and manufactures power conversion, measurement and control solutions that are used by a wide variety of industries.
During our sales cycle, we worked with the customer to identify significant operational improvements using model, and that will result inefficiencies and pricing strategies in a meaningful reduction in revenue leakage. This customer also plans to use model and as an enabler for future acquisitions. Given this model and will allow them to quickly implement key channel incentive and pricing strategies into the newly acquired business. It is gratifying to see both of these new high tech customers turn to model and as a strategic partner to enable their growth strategies.
Turning to professional services, our team exceeded expectations with another strong quarter. The results of our professional services organizations symbolize the strong demand for our mission critical solutions as companies seek to drive top and bottom line improvements. Our professional services team continues to do a terrific job of getting new cost. one project that I'd like to call out is Genentech, and they're successful SaaS transition to support their pharma business.
Genentech is the latest example of our team working closely with a long time customer with a very complex configuration and successfully moving them to our cloud. Play for this project also includes the implementation of our proprietary testing suite that helps pharma companies more easily maintain compliance with internal audit, while also being able to quickly adapt innovation and regulatory updates.
Again, congratulations to Genentech and our services team for achieving this important milestone in our relationship. As we focus on future growth, we continue to build new products in collaboration with our customers. one. Recent example is price management for high tech, a new product that enables manufacturers to simultaneously manage price execution across direct and indirect channels globally.
This new modules fully integrated with our deal management product and streamlines pricing updates to enable tight pricing control and real-time market execution of changes. Finally, earlier today, we issued our new 2024 state of revenue report. This marks our sixth Annual Report, which identifies the top challenges and opportunities for pharmaceutical MedTech and high tech manufacturers.
This report is based on the results of a survey of more than 300 C-suite executives directly responsible for revenue management. three themes stand out to me in the 2024 report because they reflect the dynamic operating environment that has become a new normal and each is something that model and can help our customers address.
The three themes are executive named process efficiency and cost savings as top priorities in this operating environment and are increasingly looking to advanced analytics and AI to achieve these priorities for a second here in a row, supply chain disruption emerge as one of the top obstacles across all industries. And finally, pharmaceutical executives do not see the pace of regulatory change slowing down anytime soon.
These insights help us better understand how to tailor our solutions to improve their life-saving products to the world. I encourage all of you to read the 2024 state of revenue reported by downloading up from our website at modeln.com. Let me conclude by saying that I'm pleased with our continued execution, and I am proud of the leverage we're showing on our bottom line as we navigate the end of our business model transition.
We are also posting tangible proof points that our long-term growth levers of new logos, customer expansion and product innovation continues to mature and are materially contributing to our bookings. I'd also like to thank Model N centers around the world. The continuing to focus on customer success are dare core values and driving profitable growth.
Because of view, we kicked off the year with a solid Q1, and I am excited about the year ahead. With that, I'll turn the call over to John to discuss our Q1 financial results and offer our outlook for Q2 and fiscal 2024. John?
John Ederer
Thank you, Jason, and good afternoon to everyone on the call today. As Jason noted, we had a very solid start to fiscal year 2024 with Q1 results exceeding our expectations for revenue, adjusted EBITDA and free cash flow. I was particularly pleased by our free cash flow performance, which at $43.5 million for the trailing 12 months ending Q1 and was up 172% cents on a year over year basis.
Looking specifically at our financial results for the first quarter, total revenue grew 7% to $63.5 million, which exceeded the high end of our guidance range, driven by upside on both subscription and professional services revenue. Subscription revenue increased by 8% to $47.7 million while Professional services revenue grew by 6% to $15.8 million and both were above guidance.
In terms of our profitability please keep in mind that will be discussing non-GAAP numbers and a full reconciliation of our results is provided in our earnings release. For the first quarter, total non-GAAP gross profit was $38.3 million, representing a gross margin of 60.3%. Non-GAAP subscription gross margin was 68.4%, and non-GAAP professional services gross margin was 35.8% in Q1, in line with Q1 of last year.
Adjusted EBITDA was $9.9 million, representing a margin of 15.5% and above the high end of our guidance range for the quarter. And finally, non-GAAP earnings per share was $0.28 based on a fully diluted shares outstanding of 39.1 million. This was slightly below our guidance due to some variance on below the lines. Turning to our SaaS metrics. For Q1, our SaaS ARR reached $134.8 million, which was an increase of $19 million or 16% versus Q1 of last year.
In addition, trailing 12 month SaaS net retention was 115% in Q1. These results were right in line with our expectations. As we discussed on last call, we are facing difficult comparisons for our SaaS metrics over the first two to three quarters of this year due to SaaS transition activity last year. Next quarter, our fiscal Q2 is expected to be the most difficult comparison.
However, we do expect growth to trend back up at the end of fiscal 2024 when we get back to more normal year over year comparisons. In terms of the balance sheet, we ended Q1 with $303 million in cash and equivalents, which was up $2 million sequentially from just from September. We also had sequential increases in accounts receivable at $83 million for Q1 and deferred revenue at $74 million for Q1 of due to a record quarter of invoicing.
Finally, as mentioned, Q1 was a very strong quarter from a free cash flow standpoint. Trailing 12-month free cash flow increased to $43 million from $23 million last quarter. Turning to remaining performance obligations are total RPO for Q1 was $349 million, which was up 3% on a year over year basis. The current portion of our RPO balance was up to $160 million, representing growth of 11% year over year and up 8% sequentially from Q4.
As I previously noted, our total RPO growth has been impacted over the last few years by long term SaaS transition deals, many of which had contract legs well in excess of three years as renewals and other non-SaaS transition bookings become a bigger proportion of the total we are seeing in our average contract length and RPO return to a more normalized level.
Looking ahead, as we said on our last call, we are still in a period of business model transition during fiscal 2024, for solid growth in SaaS revenue will be partially offset by declines in maintenance revenue. Once we are completely through SaaS transitions and the business model normalizes, we believe that we can return to double digit total subscription growth over the medium term.
Our website for more details on our midterm financial targets, which we outlined on our last earnings call. In terms of our guidance for the remainder of fiscal 2024, we are raising our outlook for subscription revenue and total revenue, reflecting our subscription performance in Q1 and maintaining our guidance for adjusted EBITDA and non-GAAP earnings per share, which calls for continued margin improvement versus last year.
Specifically, for fiscal 2024, we expect total revenue to be in the range of $260.5 million to $263.5 million, with subscription revenue in the range of $193.5 million to $195.5 million and professional services revenue today in the range of $67 million to $68 million. We expect adjusted EBITDA to be in the range of $48 million to $51 million and non-GAAP EPS to be between $1.25 and $1.32 per share based on a fully diluted share count of approximately 40.1 million shares.
For the second quarter of fiscal 2024, we expect total revenue to be in the range of $63.5 million to $64.5 million, with subscription revenue in the range of $48.5 million to $49 million and professional services revenue in the range of $15 million to $15.5 million. We expect adjusted EBITDA to be in the range of $9 million to $10 million, and for non-GAAP EPS, we are expecting a range of $0.24 to $0.27 per share based on a fully diluted share count of approximately 39.7 million shares.
As a reminder, there is some seasonality to our business, and our second fiscal this quarter is the period when we see increased expenses for payroll taxes and other benefits. As a result, the second quarter is typically the low watermark for adjusted EBITDA margin during the year. To summarize, Q1 was a strong start to fiscal 2024, and we continue to execute well, who are getting through the final stages of our business model transformation, while at the same time, still driving top line growth, margin improvement and strong free cash flow.
With that, I'll turn the call over to the operator for any questions. Operator?
Question and Answer Session
Operator
Thank you. we will now be conducting a question-and-answer session.(Operators Instructions)
Ryan MacDonald, Needham & Co .
Ryan MacDonald
Thanks for taking my question to say about the bookings commentary and obviously the continued progress in the SaaS transition. You noted in your remarks sort of this confidence in returning nearly a double digit growth, you know, and sort of growth improvement as we get into the later parts of the year. And once the one from difficult comp sort of pass through, I guess, early in the year as you're having pipeline building discussions and started to see some of that progression, can you talk about what the environment in terms of spending environment and that gives you confidence sort of in that trajectory?
And in regards to the SaaS transitions, as we've now passed cost over the end of support date on how has that conversation shifted with the remaining customers?
Jason Blessing
yet the good series of questions in there, right events on the asset. So first of all, on the macro environment, I think we are one of the first companies in our space in our fiscal Q2 last year to call out some deal obligation cycles and delayed SaaS transitions so that the softness in discretionary spend, as you're aware, that we subsequently followed up that commentary with statements indicating that we didn't see the demand environment deteriorating anymore.
I think as we come into this year, we feel like we're in a more stable environment, particularly as you have a better of the market that has a better sense of things like that, invest at the present interest rates and some of the other key metrics. So I would say the backdrop has not deteriorated. And I also think there are particular corner of the world, things like regulatory changes continue to drive demand on EBIT.
In terms of, you know, as I look at our pipeline there this year, one of the things that means if we are expecting to have a nice contribution from new logos as well as our customer base, we certainly see that most of the new logos posted in Q1, and it has a good pipeline as we look forward share. So it's a great team on the new logo type mentions of s call as well to that part of next year, we had a lot of customers that were at or below past transitions.
And this year, we have essentially the full base starting to come back to us, really presenting the full opportunity to sell into the basis for the best returns. But now that we are officially past place on December 31, when I look at our customer base now as we reported on our last cohort from were more than 80% for to that are in US payments.
But I mean, literally talking about a handful of customers and have really good visibility into when those customers those will convert. And we're also carrying partner in that matter, the path to move forward with its fourth season of the year. While you're hitting transaction, even though the support for on-premise has labs and that's the message well received by our few remaining customers that are transitioning. That's correct there.
Ryan MacDonald
And maybe just as a follow up on product, a great to see the launching of price management wins within the sort of the semiconductor and high-tech arena. I'm curious, as you think about the rollout of this for offering to that segment of the customer base and the adoption curve, how do you expect that to compare relative to pricing management that you had on the Life Sciences side?
And forgive me for not knowing, but is there any sort of regulatory impetus on the high-tech side that Mike, when support like you got on the core life sciences business? Thanks.
Jason Blessing
Good question. So this particular new product on the high-tech side, it's not something driven by regulatory changes, its ability to address. If you give the new partnered with a couple of customers to build where oftentimes the price book and Arca price-focused workplaces are stored for that dynamics of the market. Further editors are discounting Ashton to take some time to get it to the front line and enable sales fabs to be in compliance with internal policies, yet also address some of the real-time competition hasn't seen out there.
So this is a product that is I can't think of it as a complement to our field management products and our customers. So and by the way, this is also something that has been asked for by other customers. So I think it's going to be very well received. We've got a customer advisory board coming up with a few weeks where we'll demonstrate this product.
We've got Rainmaker coming up here. June was of the year before we know and the between the standard enablement we're doing with our sales forward. I'm excited about its products, and I'd like to truly make a difference, particularly in these said, reflects the conductor where margins are facilities.
Ryan MacDonald
Appreciate the color. Thanks for taking my questions.
Jason Blessing
(inaudible)
Operator
Joe Vruwink, Baird.
Joseph Vruwink
Great. Thanks for taking my questions. Jason, I wanted to go back to the buyer. When had you mentioned in the comments you had they're thinking about future pipeline and wanting to ready the right technology at around the business strategy with those pipeline.
I think over the past year, that feedback from a lot of vendors surveying Pharma has actually been kind of the opposite. You know, we are hearing from customers. They don't know what the pipeline is going to bring. And so they're kind of delaying new attack decisions on not the words in your mouth, but this seems more like offense at your customers is that may be more pervasive is beginning to become more of a offense of our decision making process?
And if that's true, what sort of model and solutions might actually start to register an uptick relative to what the prevailing experiences that?
Jason Blessing
Joe, thanks for the question. Joe, can you hear me? I have just been told we're having some audio issues so far.
Joseph Vruwink
So good at you were breaking up earlier, but I hear you now.
Jason Blessing
Okay, wonderful. Yes. So this question, a drug pipeline and the customers playing offense or defense, I think is an interesting one. Some customers certainly have robust pipelines and a unique growth opportunity in front of them. There's certainly one of those. Obviously you've been selling there in general on the in the news is they're going through a bit of a business model transition on their own and activations on different parts of the business isn't anything confidential.
It's obviously been well reported in the business trade with round up in the month dental acquisition. But certainly in terms of other partners with us, they're really excited about their pharma business. I have the pipeline that differentiates them from some of their other partners in the in the industry, but they certainly do have a good pipeline of drugs coming up that they've been talking about.
And there is one of those companies that I guess it kind of affected revenue manage and their SAP customer. And they Ed Quilty together a revenue management on solution that was some SAP's stuff, some custom stuff, some anecdotal stuff. And I think they finally got to a point where they just said, hey, there's so much, Carl. I heard so much leakage that's happening and so much infrastructure we're going to need as we're reinventing the company and refocusing on pharma and some of these laws launches, let's turn to the industry leader.
And so of course, we were the beneficiary of that. I think the other important point I would mention on bare, they basically bought our core footprint to help with commercial and government pricing. And there's also, I think, a pretty interesting set of additional areas where we can help them after we get them live on this initial phase of additional modules in the US plus potential international expansion. So we're excited to welcome back to the model and family, and I think we can really help this iconic brand.
Joseph Vruwink
Okay. That's great. And then one for John SaaS ARR up 16% and 1Q slower than that in Q2, just because of the comps and then trending back up towards year end, should we make the read that they're part 4Q SaaS growth is faster than what you just said then 1Q and so far in terms of your CRPO bookings stand, where the pipeline stands as is everything is still kind of support of that outlook for a stronger second half of the year?
John Ederer
(inaudible- microphone inaccessible)
Joseph Vruwink
You're a bit a bit quiet.
John Ederer
All right. Any better there?
Joseph Vruwink
Yes, much better.
John Ederer
Okay. So yeah, in terms of the SaaS ARR metric and in Q1 and then also the outlook for the year on a little bit of pressure on the year-over-year growth in Q1, and we expect that to be and even more difficult comparison in Q2, when you look at last year, I believe were up 40% year over year for that number. And so it's a pretty tough comp for Q2.
But then after Q2, we can see a path towards improving metrics over the second half of the year. And in closing out the year at a higher level will still have to we'll start to book some business between now and then. But we feel like we've got decent line of sight in terms of how that metric is going to perform over the course of the year.
Joseph Vruwink
Okay, great. Thank you very much.
Operator
William McNamara, BTIG.
Hi, guys. This is Bill on for Matt. I wanted to follow-up on the price management tool and tech question. Is there any insight you can give us about kind of the total addressable market you're seeing for this product?
Jason Blessing
Yes. So I think we've talked about our high-tech and being around 1 billion in what we've found as we've been rolling out some of these new add-on products, they have the opportunity to provide anywhere from 10% to 30% uplift based on what a customer existing customers is paying us of these.
These smaller in a portfolio of products that were rolling out our add-on products, probably a better way to characterize them really do have a meaningful impact on our TAM. And they also give us fresh new things that we can bring into our customers and address dress issues that are that are top of mind. And so we're excited about this. And it, as I've said, I think in past calls, and this is no exception every new product that we build, we're actually building it in conjunction with a handful of customers that make sure we get the usage patterns and functionality, correct.
For this product. We have the rights to be able to actually say those customers. But rest assured, this is being battle tested with that with some customers. I think it's going to be really well received as we share it with our customer advisory boards of companies that would be great candidates for as well as bring at the Rainmaker at a few months and demonstrate it.
Great ( inaudible)
Operator
Adam Hotchkiss, Goldman Sachs.
Adam Hotchkiss
Great. Thanks for taking the questions. I'd be curious how you're positioning the sales force now that you're mostly past SaaS transitions and you see a significant amount of capacity that's being freed up here for customer success and other expansion activity. And then how do you think that piece impacts net revenue expansion if at all over the next few quarters and into next fiscal year?
Jason Blessing
Yes. Thanks for the question, Adam. I'll take the first part of that. So on we have the same sales force that's been selling SaaS transition than transitions on and sells add-on products or cross-sell upsell. And the three motions that we sales motions that we've talked about for cross-sell, upsell or adding new products are expanding. The footprint moving into other divisions are moving into new geographies.
And so that kind of said, I think in response to one of the other questions at the top of the call that team the relationships that they've built going through SaaS transitions, I think uniquely positions them to identify these opportunities. And then particularly as customers get live within our stable in the cloud, it really opens up the full customer base to resell them because we had a sales force that was really load balance to handle SaaS transition.
And now some of the upsells we haven't anticipated or we don't see the need for a large investments in the customer base sales force. one of the things I have talked about is that if you go back a couple of years ago, most of our resources where they put it this way, our sales resources were dispersed. Fortunately aimed at the customer base to make sure we didn't get stuck in the middle of the SaaS transition. We had to make some difficult trade-offs as a result of that.
And so new logo does suffer a bit in terms of investments in '21 and '22. But knowing as we went into '23 that we were coming to the end of SaaS transitions, we did start to invest more in building out that new logo team to bring a little more balance in our sales capacity. And it's nice to start the year with that team posting a great quarter and see that there's still a meaningful opportunity on the on the new logos side.
John Ederer
Adam, this is John. I'll just chime in quickly on the on the net retention numbers. Just as a reminder, that net retention metric is going to track very closely to the SaaS ARR growth rate numbers. And so this year, we're going to have tough comparisons for the net retention number, just like we do on the ARR growth rate filing out a few years. And if we look at the mid-term target that we talked about on the last call for your SaaS growth in the 15% to 20% range, in that scenario, I would expect net retention to normalize in the low to mid 10s. So call it kind of the [110% to 115%] range with the remainder of growth coming from new logo activity.
Adam Hotchkiss
Great. That's really helpful. And then just on the high-tech side, it's going to see the momentum there with Taiwan Semi. Could you just remind us how we should think about the long-term mix of that business compared to Life Sciences and what the path forward looks like from here given your a little less penetrated there?
Jason Blessing
Yes, the revenue mix today is about 15% high-tech and the balances on life science, life sciences. And that my guess is that mix doesn't shift materially over time just because of a flywheel that spun up in life sciences and with SaaS transitions and then some of the ad on customer base sales and of course, new logos piling on top of that. That's I'd say we're not excited about the high-tech business.
We did talk over the last couple of years during COVID and raising and rising interest rates. That market did seem to get disproportionately more conservative relative to Life Sciences. But it's exciting to see the performance in Q1. And I'm very optimistic about this segment of the business as we look forward to the second half, we've got great products and we've got a really good high tech team. So I think they're set up every year.
Adam Hotchkiss
Okay. Very helpful. Thanks, Jason. Thanks, John.
Jason Blessing
Thanks, Adam.
Operator
Craig Hettenbach, Morgan Stanley.
Craig Hettenbach
Yes. Thank you, Jason. Just going back to the cloud transition, rough sense of how many customers are remaining? And then importantly, what type of indication is through discussion as to hear these customers in terms of visibility that they'll move over the course of the year?
Jason Blessing
Yes. Thanks. Thanks for that. And Craig, good question. So we have committed to updating investors on the status SaaS transitions at the beginning of each year. So 85% at the end of last year. And that kind of implies were down roughly a handful of remaining customers of that remaining handful. There's really only a whole very large ones in there.
And so the number is small enough that we can play man demand, defense and have a really good sense in each one of these. And I think we've got great visibility into how these customers move over through the remainder of this fiscal year. And as I said in response to one of the past, question's a good point, just to clarify it again to reemphasize that for these customers that are actively engaged in working with us post end of life in December, we are continuing to be a great partner them, support them and make sure we've got a great roadmap ahead. But we feel really good about the handful of remaining customers to convert.
Craig Hettenbach
Got it. And then this is a hub. I wanted to touch on data and analytics at Rainmaker. You talked about a new product development in tandem with customers. I know it's early stages back last summer, but just kind of where things stand today and what are your thoughts in terms of commercializing some of the product?
Jason Blessing
Yes. That's also a great question, Craig. I think it's an interesting question and that some people say, what are we going to start to see data and analytics products being sold? And we already have great examples of products that fit that category for us today. Things like global price management, global launch excellence, [three 40 b. vigilance] that are products that are getting a lot of attention from prospects and customers today.
But specific to your question last year, last summer at Rainmaker, we announced two new products, formulary access, having syndicated customer master, and we're well on our way to delivering those products. We've got them slated for release in Q3 of this year. And both of those projects also are being co-developed with us by top top20 50 pharma companies.
So I think we're getting really good insight into the problem statement. And what really matters to these customers formulary access is just ensuring that the hundreds of millions of dollars for the patient access fees that pharma companies pay that they're actually getting that access remarkable today. This isn't really being audited. It's manually spot check for some of the bigger therapies, but we'll provide a solution that will provide full coverage on formulary access audit.
And then the second is what we're calling syndicated customer master. And think of this as an industry, gold copy of the payers and providers and the different purchasing programs that they're eligible to participate in with the manufacturers falls another big, big pain point as well. So we're on track to deliver those two products and looking forward to it and thanks to our customers, we've had a great group guiding us through the development life cycle over the last three, four quarters.
Craig Hettenbach
(inaudible)
Operator
Samad Samana, Jefferies.
Samad Samada
Hi, good evening and thanks for taking my questions. Maybe first on just the 2Q guidance and if you could remind us, I think it implies that professional services revenue will be kind of flattish quarter over quarter by look back at historical seasonality, you get a bit more of an uptick. Can you just remind us about the seasonality and if there's something that we're missing this thinking into the guidance?
John Ederer
Yes. this is John. I'll take that one. And it's a good question. So you are correct. Typically in Q2, we see a little bit of an uptick from a seasonal standpoint in this business. However, this quarter, we're having a little bit of a challenge with a small handful of projects that we can't get underway. And so we're heading to go, but the customers aren't quite ready.
And so we've had a few delays in Q2. So it's basically some timing issues that we think we can fix over the course of Q3 and Q4. And I would note that that business actually had a record quarter in bookings in Q1. So we exited Q1 with very strong backlog. We just have a little bit of a timing issue in Q2 here.
Samad Samada
Understand that's helpful. And then anything zooming out. Just you mentioned book and again, it hasn't asked a slightly different way that I think the revenue mix section changed materially between life sciences and high-tech. But when you think that this year, I think that high-tech will increases and mix as a percentage of bookings is given the strength you saw in the first quarter or any help that you're seeing versus what you'd normally team mix-wise and as the pipeline compare unified up again into revenue conversion yet?
Jason Blessing
yet when we take a look at in terms of the bookings mix as well as the revenue mix, I don't see there be a tectonic shift in either including bookings. I will say this and you see it with our color commentary on Q1. We have definitely seen high-tech improve that as end market over the last I would say year ago. And we started our existing customers, expanding their relationship with us and expanding usage of Model N. And then it's up. It's been encouraging to see a new logo pipeline build and matriculate through the two new logos in the quarter.
Samad Samada
Great. Thanks for taking my questions.
Jason Blessing
Thanks, Samad.
Operator
Brian Peterson with Raymond James.
I think this is Jonathan Mcary on Brian. And can I think you're taking the question? Some question on sort of midterm targets. So that 15% to 20% subscription growth in the midterm was, as you know, some low 10s coming from exposing yourself versus what you've got a reasonable goal. Was your current product portfolio or as Bob and require more organic or inorganic investments needed to drive well-timed longer term?
John Ederer
Yes, hi, this is John. I'll chime in that. That is largely based on what we have today. We're on the brink, you're rolling out additional products and data and analytics and that would that would ultimately factor that into that those numbers in a few years as well. But I would say it's predominantly selling what's on the truck today.
Got it. Got it. We're also opportunity on that that's still kind of setting up mid-single digits range. Would you expect that maybe just shift over time? And what does that what are some of the key gating factors on keeps on expanding internationally?
Jason Blessing
Well. So I guess this is actually a really interesting question. So if you look at most of our customers today, they are global pharma companies and we've opened them in their US operations summer headquartered here somewhere, but nearly all of them have off operations in Amea just by definition of being large global pharma companies, the thing that this has allowed us to do is we have actually worked with a number of these customers are in partnership to build a couple of great products that I would say are functionally complete today like the global tender management and global price management.
And then I suppose you could add a third on global launch excellence, which Apellis took this quarter to complement our global price management. So this this motion of servicing and selling to North American global companies has allowed us to partner with them with to build out products that are that are functionally complete for the European market.
Like most companies as they start to move into other geographies. Sales coverage is always one of the things you have to tackle. We do we have started we align tag-team the region with global accounts because a lot of the purchasing decisions do involve folks in the US. So I'm excited about the products we have and really just over time is about scaling and making sure that we've got the right selling motions and sales covered in the region.
Thank you.
Jason Blessing
Thanks, John.
Operator
Pat Walravens, JMP.
Aaron Kims
Hi, this [Aaron Kim] on for Pat. Of the 15 customers that accounted for about 53% of your revenue on September 30. How should we think about where they are in their cloud transition relative to the long tail of customers that account for the other [47%] of the revenue side?
John Ederer
Yeah, this is John. So I think you're referring to the disclosures in the Q's and K's about the top customers. And I would say a high percentage of those have either completed or in process on SaaS transitions. And so that number's typically calculated on a total revenue number, (technical difficulty) which would include both subscription and services. (technical difficulty)
Operator
Thank you. I would like to turn the call over to Jason Blessing for closing remarks.
Jason Blessing
Thank you, operator, and thank you, everyone, for joining us today. As we discussed on today's call, we started out our fiscal 2024 with a good quarter and once again, delivered strong, profitable growth. I really appreciate all of our employees, customers and partners for supporting us. And thanks again for joining us today. And have a wonderful night.
Operator
This concludes today's teleconference. You may disconnect your lines.
