Feb 6, 2018
Executives
Staci Mortenson - IR, ICR Zack Rinat - Founder, Chairman & CEO David Barter - CFO
Analysts
Chad Bennett - Craig Hallum Steve Wardell - Chardan Jackson Ader - JP Morgan Ryan MacDonald - Dougherty and Company Pat Walravens - JMP Group
Operator
Greetings and welcome to the Model N First Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode.
A question-and-answer session will follow the formal presentation. [Operator Instructions].
As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Staci Mortenson with Investor Relations.
Please go ahead.
Staci Mortenson
Good afternoon. Welcome to the earnings results call for Model N's first quarter fiscal year 2018, which ended on December 31, 2017.
With me today are Zack Rinat, Founder, Chairman, and Chief Executive Officer; and David Barter, Model N's Chief Financial Officer. A 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 fiscal year 2018 performance and our financial outlook for our second quarter and full-year fiscal 2018. 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 in documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
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 should be considered in addition to, not as a substitute for or in isolation from, GAAP results. Reconciliation of the non-GAAP metrics to the nearest GAAP metric are included in the earnings 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 first quarter fiscal year 2018 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 for our first quarter fiscal year 2017.
With that, let me turn the call over to Zack.
Zack Rinat
Good afternoon and thank you for joining us today. I will start the call today discussing Q1 fiscal year 2018 financial and operational results in the context of the strategy we communicated in our previous earnings call.
David Barter, our CFO, will follow me with the financial details. Model N started fiscal year 2018 with another record quarter with the following highlights.
One, fifth consecutive well executed quarter exceeding our guidance on both the top and bottom lines as we did in each of the previous four quarters. Second, record quarterly SaaS and maintenance revenue.
Three, second consecutive quarter of positive adjusted EBITDA. January 5th marked the first anniversary of Model N and Revitas as a united company and we continue to believe that the Revitas acquisition is transformative for Model N and is delivering value to our customers and shareholders.
Q1 fiscal year 2018 financial results are once again strong testaments to the excellent progress we made over the last year. In our previous call, we discuss our strategy to drive a strong fiscal year 2018 and deliver for our customers and our shareholders as we: one, drive revenue management as a strategic enabler for our customers and accelerate the growth of Model N; two, deliver comprehensive end-to-end revenue management solution and accelerate our Land and Expand strategy by cross-selling and upselling dollar installed base; three, leverage our Revenue Cloud to farther expand in our core verticals, and in particular, MedTech, semi and High Tech and Pharma mid markets; four, accelerate the transition of revenue management into the cloud and complete the transformation of Model N to 100% SaaS and maintenance revenues; five, optimize the cost structure of Model N and deliver profit and positive cash flow; and six, innovate taking advantage of the significant market opportunity for revenue management.
In December, we took a big step forward in the implementation of this strategy where we unveiled a major release of our Revenue Cloud platform. We believe that Revenue Cloud is the first end-to-end revenue management platform to enable digital reinvention for companies in the Life Sciences, technology, and manufacturing industries.
Life Sciences High Tech and manufacturing companies are facing digital disruption and need to reinvent the core of their business with aggressive business strategy transformations. McKinsey predicts that both tightly integrated digital strategies will be the biggest differentiators between companies that win and companies that don't.
And that the biggest payout will go to those that initiate digital disruption. Fast followers with operational excellence and superior organizational would not be far behind.
Both digital reinvention strategies begin with placing customers as the center of the company's digital activity. Instead of seeing themselves through the internal lenses of functions, product, and processes, companies now see themselves through the lens of their customers.
These strategies require deep understanding of unique customer segments need, business model, revenues, profitability, and more. Companies that embark on digital reinvention strategies must do the following: one, redefine the business they are in; two, redefine who the customers are; three, reinvent their offering to those customers; four, delight customers in each interaction; five, positions themselves into digital ecosystem; and six, realign operation with intelligent internal processes.
Live and offensive platform strategy focused on the demand side is proven to yield the best result only 1.5% of companies have adopted one, mainly due to the lack of digital reinvention platform. Model N Revenue Cloud is the first digital reinvention platform design specifically for Life Sciences, High Tech, and manufacturing companies.
This release of Revenue Cloud includes the following highlights: one, introduction of Model N's CPQ, the next generation of configure price and quote which enable companies to reinvent their offering and their business model; two, introduction of Modern N channel cloud, an end-to-end solution to manage the digital ecosystem in omnichannel; three, introduction of Revenue Cloud for semiconductors and Revenue Cloud for manufacturing; and four, new versions of Revenue Cloud for Pharma, Revenue Cloud for MedTech, and Revenue Cloud for High Tech. During the first quarter we won several deals in both Life Sciences and High Tech with companies such as Amgen, DexCom, Mallinckrodt, CSL, Intel, and Seagate to name a few.
While I'll usually focus my comments around our core verticals, I would like this time to share with you details about our win with Toro. Toro is a $2.5 billion global provider of innovative solutions for the outdoor environment including turf maintenance, snow and ice management, late landscape, specialty construction equipment, and irrigation and outdoor lightning solutions.
Toro employees almost 7,000 people with complex product and varied configurations. Toro evaluated the industry-leading CPQ solutions and selected Model N's CPQ for the following reasons: the only CPQ solution that is both Salesforce1 native and enterprise grade; performance and scalability to hand complex configurations, large models, and large amounts of transactions; interoperability with SAP leveraging master data and product and pricing information stored in SAP; intelligence approvals to enable faster streamline deal processing; and then, last, ability to quote based on net price after rebates and not just gross price.
We are very excited to have Toro join the Model N family. While we are very pleased with our wins, we are equally excited when our customers go-live and start to retain on their investments.
We had significant go-lives in the first quarter and one I would like to highlight was EMD Serono. EMD Serono went live with a new version of Model N global price management, including International Reference Pricing or IRP and Global Launch Excellence or GLE.
In particular, EMD Serono is able to maximize revenues across the globe for two new product launches through sophisticated launching optimization algorithms. EMD Serono went live in our cloud demonstrating once again our continuing success in driving Model N to 100% SaaS business model with recurring and highly visible revenues.
I'm pleased to let you know that our transition is progressing faster than expected, as we no longer selling perpetual licenses in the corresponding implementation services. In conclusion, this was a record quarter for Model N and we believe that we are very well-positioned to achieve our strategic goal for fiscal year 2018.
Before turning the call over to David, I would like to personally invite you to attend our Analyst Day on Wednesday March 15 at the New York Stock Exchange in New York City. David?
David Barter
Thank you, Zack. We continue to make progress driving growth, scaling the business, and converting the business to 100% SaaS.
We had another healthy quarter across our key metrics including SaaS and maintenance revenue growth, gross margin, and adjusted EBITDA. The way we measure growth is through SaaS and maintenance revenue and in the first quarter SaaS and maintenance revenues were $32.3 million.
Included in this is approximately $23.8 million of recurring revenue and $8.5 million of professional services related to the implementation of SaaS subscriptions. Our GAAP revenues also reflected purchase accounting entry of $627,000 and we believe this is the last quarter in which we will have a corresponding purchase accounting adjustment for Revitas.
License and implementation revenues were $6.7 million. As a reminder, we no longer sell on-premise perpetual licenses.
Further it's important to note that we believe this revenue line has peaked and it will decline over the course of fiscal year 2018 as we burn off the backlog. Total revenues for the first quarter were $39.1 million which is well above our guidance range of $37 million to $37.5 million.
Before I move on, I want to remind you that my commentary will be focused on non-GAAP results which excludes the impact of purchase accounting. A reconciliation of non-GAAP to GAAP results is provided with our earnings press release issued earlier today.
Non-GAAP gross profit for the first quarter was $23.9 million compared to $15 million in the first quarter of fiscal year 2017. Overall, non-GAAP gross margins in the quarter were 60% compared to 53% in Q1 of last year and 61% at the end of Q4.
Our gross margin this quarter reflects a slightly higher mix of professional services. As I mentioned on our last call, we are investing in professional services to support our on-premise transition customers or OPT in their adoption of Revenue Cloud platform.
Overall, we believe our gross margins for each revenue element are heading in the right direction as we scale the business. Non-GAAP operating expense was $21.9 million compared to $19.2 million in the first quarter of fiscal year 2017 and $22.5 million in the prior quarter.
Non-GAAP operating profit for the period was $2 million compared to a loss of $4.2 million in the first quarter of last year, and stronger than our guidance of an operating loss of $300,000 to an operating profit of $200,000. Non-GAAP net income in the first quarter was $824,000 compared to a net loss of $4.1 million in the first quarter of last year.
We delivered a positive non-GAAP net income per share of $0.03 based on 29.4 million shares. This was well ahead of our guidance of a non-GAAP net loss of $0.05 to $0.07 per share and it compares to a net loss per share of $0.15 based on 28 million shares in the first quarter of last year.
On a GAAP basis, operating loss for the period was $4 million compared to a loss of $7.7 million in Q1 of last year. GAAP net loss in the first quarter was $5.3 million compared to GAAP net loss of $7.6 million in the first quarter of last year.
Adjusted EBITDA for the first quarter was a positive $2.9 million, a meaningful improvement compared to the negative $3.5 million in the year ago period, and $1 million in the prior quarter. Across the company, we remain focused on scaling the business to deliver meaningful levels of profit and cash to our shareholders.
At the end of the first quarter, total deferred revenue was $57.6 million. This reflects the seasonality of the maintenance and support for our legacy on-premise implementations.
As a reminder, deferred revenue in calculated billings are not perfect measures for our business as it's not uncommon in Life Sciences for some customers to pay quarterly. We ended the first quarter with $48.3 million of cash and cash equivalents which is down from $57.6 million at the end of the fourth quarter.
Cash used in operations was $9.7 million. This is in line with our expectations for Q1.
It reflects the payment of our corporate bonus, Q4 sales commissions, and the interest on the seller's note associated with the Revitas acquisition. Our cash flow also reflects the fact that many of our customers closed their offices for the holidays and since December 31st was a Sunday they remitted their payments to us in January.
We collected over $3 million during the first few days in January. Before I provide guidance for Q2, and fiscal year 2018, I would like to build on what I shared on our last call and provide some updated perspective on the principles guiding our financial management of the business.
We remain focused on several key initiatives. One, driving growth with revenue management as a service as we move the business towards 100% SaaS.
For fiscal year 2018, we still expect SaaS and maintenance revenue to be between 86% and 88% of total revenues. The on-premise professional services backlog is down to $12 million for the remainder of fiscal year 2018, while it's possible we will receive new requests for work.
We're encouraged by the dialogue with customers and the interest in revenue management as a service. Two, our commitment for fiscal year 2018 was to be profitable in each quarter.
Adjusted EBITDA was healthy in Q1 and we remain very comfortable delivering on this commitment. The entire company is focused on scaling the business and delivering meaningful levels of profit.
Three, building the business to generate sustainable levels of cash flow. We expect to generate positive free cash flow in Q2, which is our current quarter, and further we will generate free cash flow in aggregate for the remainder of the year although there will be some quarter-to-quarter fluctuations.
It's worth reminding you that we will have approximately $5 million of interest payments related to the Revitas acquisition. We will also be paying down $5 million of our debt in the latter part of the year.
Overall, my expectation remains that the company will improve free cash flow by approximately $10 million in fiscal year 2018 compared to fiscal year 2017. With these principles in mind, I would like to outline our guidance for the second quarter of fiscal year 2018 as well as provide our updated expectations for the full-year.
Please note this guidance is GAAP revenue guidance. For our second quarter ending March 31, 2018, we expect total revenue to be in the range of $38 million to $38.5 million as we transition the business to 100% SaaS and maintenance.
We expect license and implementation revenues to be approximately $6 million in Q2. Non-GAAP income from operations is expected to be in the range of 0 to $500,000.
This would lead to a non-GAAP net loss per share in the range of $0.05 to $0.03 based on a weighted average share count of 29.8 million shares and assuming approximately $1.4 million of net interest expense and amortized debt financing fees. Adjusted EBITDA is expected to be in the range of $1 million to $1.5 million.
This guidance reflects the impact of payroll taxes which will increase seasonally by approximately $1 million, as well as the impact of fewer calendar days in Q2 to earn ratable revenue. For fiscal year 2018, we are raising our guidance.
We now expect revenue in the range of $149 million to $151 million. Our non-GAAP income from operations will be in the range of $2.8 million to $4.8 million and non-GAAP loss per share in the range of $0.10 to $0.03 based on a weighted average share count of 30 million shares, and assuming approximately $5.2 million of net interest expense and amortized debt financing fees.
For fiscal year 2018, adjusted EBITDA is now expected to be in the range of $6 million to $8 million. This guidance, as well as our Q1 tax provision, reflects our initial assessment of the new tax legislation.
Based on our review, we do not expect the legislation to have a material impact on our financial results. We are pleased with our performance in the first quarter and the progress we're making puts our objective to transition the business to 100% SaaS and deliver sustainable levels of growth and profit.
We are leading our industry through product innovation in the cloud and are focused on customer success; we believe leads to a very bright future for Model N. With that, let me turn the call over to the operator for questions.
Operator
Thank you. At this time, we will be conducting a question-and-answer session.
[Operator Instructions]. Our first question comes from the line of Chad Bennett with Craig Hallum.
Please proceed with your question.
Chad Bennett
Hey guys, thanks for taking my question. Just phenomenal quarter top to bottom, love seeing the deferreds, love seeing the new customer Toro, especially for your CPQ solution and it just all around looks like a great bookings quarter, so nice job.
Zack Rinat
Thank you.
David Barter
Thanks, Chad.
Chad Bennett
So just digging a little deeper on the total win, Zack, I think you did a great job of highlighting the differentiation of you guys and why you won versus others? I want to dig in a little deeper on the interoperability with SAP part and get a sense for how important that is just kind of knowing the competitive landscape a little bit in CPQ and what is your overall kind of exposure I guess to SAP between Life Sciences and High Tech, how much your basis is kind of based on that infrastructure?
Zack Rinat
Sure. Thank you and that's kind of great kind of question.
First of all when you look at kind of world right now and I spoke about the notion of digital reinvention and what companies are trying, not trying to do. The notion of digital invention is that you should not start from scratch and actually companies that are leaders in this space have an ability to leverage their assets that they have.
A lot of their products are in SAP and in other parts of the kind of ERP. And furthermore SAP had a legacy configurator called Variant Configurator where companies really define a lot of the product that kind of that they serve.
In our view of the world, it's very important to have complete interoperability with SAP on one hand, and with Salesforce on the other hand, because what it enable you to do, it enable you to have a seamless business processes end-to-end and really align all the interactions with the customers, but bring all the assets that they have. The interoperability that we have from -- with SAP coming from a deep understanding of the market, where, especially, if you think about where you want to order to execute order to cash, how you want to do financial reconciliation, how you commit the entire enterprise interaction with the customers aligned in the digital world, this is really paramount.
Furthermore, if you want to deploy and execute new strategies this giving you an important stepping stone to go on to do it in a very fast way rather than to reinvent the way. From a technical point of view, we have integration with SAP on couple of levels.
We have integration on the master data, i.e. customer master, IT master, and all of the above.
We also have integration with SAP on transaction data that is coming directly through invoices and purchases and all of the above. We have process integration where we enable you to translate quote into order, execute in SAP, and then execute also rebates in kind of knowing in the back end.
And one of the unique features that only Model N has is the ability to pull items from the Variant Configurator, it's called KMAT, K-M-A-T models where you could really pull the entire business model and start enhancing them. That's a very important aspect and for companies like Toro or other companies in the enterprise that's something that is part of being an enterprise grade and an end-to-end solution for them.
When you look at our target market, SAP has a very large installed base in the Life Sciences, both pharma and medical device. And they also have large installed base in manufacturing, in High Tech, although in High Tech it's a little bit more heterogeneous we can also see some Oracle systems than in others.
But for the most part, most of the large companies they run on SAP and in the case of Toro, it was very critical to our window.
Chad Bennett
Got it. Great color.
Couple more for me if I may. I know last call you guys were I'd say some more like I don't know cautious maybe it's too strong a word, but I wanted to see kind of budgets flush out especially with your Life Sciences customers both heading into the fiscal year, but heading into a new calendar year here, and when you -- and took a very conservative stance on conversion activity there and really didn't take a lot of that into your guide for the year.
Now that we're I guess somewhat into the New Year, are you more comfortable with your Life Science customer budgets and are you more confident in conversion activity. I didn't hear you point out conversions specifically on the call whether it's Amgen or Mallinckrodt, but any kind of color there on your visibility today versus the last time we heard from you?
Zack Rinat
Couple of aspects on this. As you know, companies usually go to the fiscal year being kind of cautious, even if budget is approved.
Most companies are really looking at how this year is going to manifest, it -- they kind of know itself. And then the release the budget is they kind of know as they go along, I would say that for me personally, I feel comfortable about the budget that the Life Sciences companies a couple of companies have.
When we went into -- kind of know into the year, we gave you a guidance that we have felt comfortable with. As you see from this we increased the bottom-line of the guidance for the year by $2 million and the top-line by a $1 million.
So I think what you can get out of it is that our level of confidence is increasing, and as David mentioned in his comments, we feel very comfortable about the guidance and feel very confident about our ability to deliver the results.
Chad Bennett
Got it. Makes sense.
And then one last one for me possibly for David it was good to see the incremental rates on the top-line and you gave great detail on the components and how you're thinking about the business. I guess implied in your previous guide range was I think roughly 25% SaaS growth this year.
You raised the overall top-line by a couple million I guess range wise, should we imply that there's, the upsides coming from the SaaS growth of the business?
David Barter
Yes. So may be unpack it a little bit.
I think when we had actually talked, we were talking about ARR and I think that represents those new logos and new products and what we're doing. And so, when I think about the 25% that was that growth of $48 million to $60 million.
When I think about that conversion of new orders and new logos to ultimately revenue I think what I had suggested on the last call was that we would see organic growth of about 15% and I think that's what you saw this quarter as well. And so I think we're feeling good as the business plan unfolds and how we're working with customers that perspective still holds.
Operator
Our next question comes from the line of Steve Wardell with Chardan. Please proceed with your question.
Steve Wardell
Hey, guys thanks for taking my question.
David Barter
Well absolutely. Thanks, Steve.
Steve Wardell
So I'm wondering if you can give us some more color on your High Tech line of business what are you hearing from customers and prospects about the issues they face in 2018-2019 that relate to revenue management. What are you seeing in terms of what's driving their interest in your product?
Zack Rinat
Yes. So when you look at kind of the High Tech business both semiconductors and then the kind of the broader High Tech kind of industry.
I would say that the first one is really driving kind of global management of kind of revenues. By nature, it's a global kind of industry, where you have a lot of complexities about how you move product from one location to kind of to another, and how you drive the kind of the global revenues.
Then the industry has a very complex distribution channels that are multi-tiered that are kind of very complex. And the companies are looking at how they can really leverage the channels in a much more way and better way and execute them kind of accordingly.
Part of it is really looking at the entire go-to-market with the channels, including of how you manage the go-to-market, how you align the marketing fund to ensure that you are in sync with the channels. Then the second aspect of this is really the execution itself with the channel and how you manage them.
Then the next part of it with the channel is how you manage rebates and how you incent the channel based on real revenues. And finally, how you put the comprehensive channel data management where you'll have basically the entire ecosystem walking on the same page with the same data on their ultimate customers on sales and on kind of inventory.
So it's become to be very critical to the way that they drive. And then putting this in concert between the direct and the indirect business and ensure that you avoid channel conflict that you don't compete between the direct and indirect, in between the indirect is you have some very sophisticated buyers that are trying to procure product in a different location is very, very -- kind of is very, very critical.
And then the entire aspect of customer-facing and digitization of the process and having intelligent processes and try to bundle especially when you have OEM in a different solution is also kind of very critical. Then the next aspect of this is price management and companies are looking about how you can really eliminate or reduce the price erosion.
How you think about the entire pocket price of the solution not just the gross price, but also how you get the net price after incentives is also a kind of very critical. So the High Tech market is kind of moving kind of nicely.
And we believe that the combination of driving revenue growth and what's happening right now in terms of the digital transformation is very important. And then the last thing that I say because I think it's obviously how they did deal right now with the M&A activity, and how they put the pieces together, how they make the sales organization more effective when you started to do some cross-sell and upsell of solutions where you integrate companies together.
Operator
Our next question comes from Jackson Ader with JP Morgan. Please proceed with your question.
Jackson Ader
Great, thanks hi guys. So first question for you, Zack, on -- and I understand the drivers of -- we're increasing the profitability profile or targets for the year, but if we only look at the expenses, so leaving the top-line out of it, I mean, is this -- are you getting more efficiency out of your sales team?
Is this any kind of residual benefit that you're getting from the Revitas acquisition? I know it's been over a year, but what's driving the expense efficiency that you're seeing in the business?
Zack Rinat
I think as you see the company scaling and we getting operation efficiency by getting economies of kind of scale, kind of across the board. And we're still making some good investment in kind of knowing the business.
But the company is getting a lot more efficient both in internal processes, on scalability, on tools, and I think it's something that we're going to continue to see where the company will not have to invest linearly with going off the revenues and that's going to translate into profitability.
Jackson Ader
And just a quick follow-up. If we're thinking 25% growth in SaaS ARR year-over-year, what do we think for sales headcount, I guess, during the same period?
Zack Rinat
Usually the way that we think about kind of sales headcount we go to the year with basically the sales people that we need to kind of we need to deliver and where we hire people during the year is basically for next year and not for the current year. So when you think about how we set the plan for the year, we went to the year with the right sales organization from a size point of view that will enable us to deliver comfortably at the plan that we set.
And our growth in kind of in headcount is this year is because what it is that we need to deliver in the next year from kind of from an ARR point of view.
Jackson Ader
Okay, that's helpful. And then one quick one for you, David.
Is there any impact on deferred tax valuation from the recent changes? I understand that the -- that your kind of cash and marginal rate probably won't change all that much, but is there any impact at all on the balance sheet?
David Barter
There's a -- we went through a pretty exhaustive process with PwC. I feel pretty good about what we put forward; there was a very small changes.
And we will continue to study the legislation. Like so many people, we've put out our SAB 118, but I feel pretty good about where we've landed on the accounting, so pretty small changes all in all.
Operator
[Operator Instructions]. Our next question comes from the line of Ryan MacDonald with Dougherty and Company.
Please proceed with your question.
Ryan MacDonald
Hi Zack and David thanks for having me on and taking my questions. Great quarter.
I think starting out, Zack, you've talked recently about sort of the opportunity you're seeing in sort of the mid-market of the Life Sciences sector. Can you discuss what sort of opportunity you see there and maybe some feedback that you're starting to hear in the pipeline for how the new revenue management cloud offering is resonating in that segment of the market.
Zack Rinat
Yes, sure. When you think about kind of the mid-market in both pharma and medical device, these companies have similar needs to the needs of larger companies, but they don’t have the investments in IT and infrastructure like the big -- kind of the big companies and by the nature they focus more on growing their products and their sales organization.
So the solution that we have for the mid-market in Life Sciences is a solution that we were successful with quite a few of customers. And they get the benefit of having a SaaS solution that is delivered to them in the cloud using the software as a utility.
By nature also that the average sales price for the mid-market is not like the large companies and I made the comments in the past where we can get, it's a very nice boost in the mid-market but most of our revenues are still going to come from large companies, from large deals that we kind of will do there. So when you look at this, we think it's an attractive market, we think that we have good solution, we are using different also channels to get to this markets either by selling them software directly or giving the software through a BPO that deliver the solutions for them, it includes both the software and the business process, and we're going to continue to pay attention and pursue this market.
Ryan MacDonald
And then, I guess, just one for David, you talked about more in investment, I guess on sort of the implementation services side. Can you just talk about what that's coming in the form of, if it's going to be additional heads this year to try to speed up some conversion activity implementation processes?
David Barter
Yes. So it's not any real substantive addition of heads.
I think what we ended up doing was and I think I called it out the last time post Q4, for Gilead and for some of the on-premise transition, it’s just a slightly larger services project. And so our services project there's still 9 to 12 month implementation.
But in order to make sure that that execution is flawless and it's a great customer experience, we're probably playing a larger role than we normally would. And so that that I highlighted after the last call and you kind of saw us play out this time in terms of just a slightly higher mix in the way of professional services.
Ryan MacDonald
Got it. Thank you very much and congrats again.
David Barter
Okay. Thank you.
Zack Rinat
Thank you.
Operator
Our next question comes from the line of Pat Walravens with JMP Group. Please proceed with your question.
Pat Walravens
Great. Congratulations to you guys and I’m sorry I joined late, so forgive me if this was already asked but given sort of the improved profitability outlook, what are the opportunities like to improve on your debt positioning?
David Barter
Pat, I think great question. I think it’s one where there are a number of opportunities as you would imagine we're kind of working through a thoughtful process and we’ll share a little bit more in probably the coming month or so.
But as the company continues to scale, as Zack had suggested, and profit and cash are heading in the right direction has opened up a number of windows for us.
Zack Rinat
And Pat just to make sure that the guidance that we gave to the market is based on what we have right now in the current date and the servicing that we have is accounted.
Pat Walravens
And maybe if I can just go a little deeper on that, so apart from what’s going on in your business, we read all the headlines about interest rates maybe going up, is it more difficult or is the environment for refinancing the debt getting more challenging just from a macro point of view?
David Barter
That hasn't been our experience yet. We still -- there still seems to be quite a bit of capital and a number of options available.
Operator
Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.
Zack Rinat
Yes, thank you all for joining the call today. We are very excited about Q1 and the results of the quarter.
We feel extremely confident about the rest of fiscal year 2018 and our ability to deliver on the strategy that we outlined. We would love to have you attend our Analyst Day in New York City in March.
So please join us if you can and thank you very much for joining us today.
Operator
This concludes today's conference. You may disconnect your lines at this time.
Thank you for your participation.