May 8, 2018
Executives
Staci Mortenson - IR, ICR Zack Rinat - Founder, Chairman, and CEO David Barter - CFO Jason Blessing - New CEO
Analysts
Steven Wardell - Chardan Capital Markets Brian Peterson - Raymond James Jackson Ader - JP Morgan Chad Bennett - Craig Hallum
Operator
Greetings and welcome to the Model N Second Quarter 2018 Conference 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. It is now my pleasure to turn the call over to your host, Staci Mortenson, Investor Relations for Model N.
Staci, please go ahead.
Staci Mortenson
Good afternoon. Welcome to the earnings results call for Model N's second quarter fiscal year 2018, which ended on March 31, 2018.
With me today are Zack Rinat, Founder, Chairman, and Chief Executive Officer; David Barter, Model N's Chief Financial Officer; and Jason Blessing, Model N's new Chief Executive 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 second quarter fiscal 2018 performance and our financial outlook for our third quarter and full-year fiscal 2018. Commentary made on this call may include forward-looking statements.
These statements are subject to risks and 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 any assumptions prove to be incorrect, actual 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 second 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 second 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 our Q2 financial and operational results in the context of our strategy we communicated in our previous earnings calls and our recent Analyst Day.
David Barter our CFO will follow me with the financial results. I would end the call discussing the appointment of Jason Blessing as our new CEO and our plan for a smooth transition.
Q2 was another record quarter with the following highlights; one, sixth consecutive well executed quarter exceeding our guidance on both the top and bottom lines as we did in each of the previous five quarters; two, record quarterly revenues and SaaS and maintenance revenues; three, third consecutive quarter of positive adjusted EBITDA; fourth, generated 4.7 million of cash flow from operations. We also announced today the refinancing of our debt which will meaningfully reduce our interest payment and improve our financial flexibility.
David will provide the refinancing details in his section. We considered the refinancing a major milestone for Model N and also a testament to the turnaround of our profitability and cash flow profile.
As we discussed in our Analyst Day the total addressable markets for revenue management is $4 billion in annual recurring revenues in the life sciences and high tech industries alone. We believe that we are still in early innings of a significant market opportunities and one that we are well positioned to win.
Our go to market strategy is focused on five areas; one, SaaS On-Premise Transition or OPT; two, cross sell and up sell; three, increasing our customer base; four, expanding broadly into manufacturing; and five, introducing new applications. During the quarter we made progress in our go to market strategy across these areas.
To begin AstraZeneca subscribed to Revenue Cloud for Pharma for their U.S. business.
A few years ago AstraZeneca started their SaaS journey subscribing to our Global Price Management application. Then AstraZeneca implemented Revenue Cloud for Pharma for their U.S.
business. Upon go-live AstraZeneca will complete their On-Premise Transition, OPT and become the first top 25 pharmaceutical companies to run their global business on out of the books SaaS revenue cloud.
SaaS OPT represents 110 million ARR opportunity for Model N. We believe that AstraZeneca decisions to embrace SaaS OPT validates the strategic value of SaaS OPT is where is the scalability of the Model N cloud because AstraZeneca is possessing close to $1 billion in rebates every month.
We hope that other companies will follow AstraZeneca and other leaders in the move to SaaS OPT. SaaS transform revenue management for these companies into utility which is always on with the most up-to-date functionality.
It shifts the ownership for all technical aspects of operating revenue management to Model N and liberate these customers to focus solely on running the business. As we discussed in our Analyst Investor Day, given the health of our business we are providing our customers with incentives to accelerate the move to the cloud.
One mechanism is escalated these structure where we ramp ARR for subsequent years. We leverage this strategy to move AstraZeneca to SaaS and we use it for the remainder of fiscal year 2018 to accelerate the transition to the cloud.
During Q2 we cross sold and up sold to several customers; one, which I would like to highlight is Integrated Device Technology or IDT. IDT's market leading products in larger frequency, high performance timing, memory interface with time interconnect, optical interconnect, while is powered in smart sensors among the company's broad array of complete mix single solutions for the communication, computing, consumer automotive, and industrial segments.
IDT is a 12 year customer of Model N extensively using our Revenue Cloud for Semiconductors. IDT subscribed to Model N's Channel Data Management to help the company gain real time visibility into channel sales and inventory to improve the granularity and accuracy of channel sales data.
In Q2 we started to up sell our customer Sandbox Mode [ph] which are non-production system provision in the cloud. The Ten Book sales enable our customers to access the current release of Revenue Cloud and the Model N SaaS tools.
In addition the Sandbox [ph] has made customers comfortable with the modeling cloud in a great on RAM for greater cloud adoptions. They also generate incremental ARR for Model N.
One of the customers that subscribe to Sandbox [ph] pose in Q2 was Genentech. Finally new customer growth is vital component of our strategy.
In Q2 we signed Gedeon Richter, a specialty pharmaceutical company headquartered in Budapest, Hungary employing 11,000 people and distributing products in over 100 countries. They would like to subscribe to our Global Price Management.
We welcome Gedeon Richter and we look forward to the go-live and to working closely with their team. Customer success is one of our core values at Model N.
As a result we are excited with our customer go-live and start to realize the benefit of our software. During Q2 we also had significant number of Go-live with the following highlights.
Swedish Orphan Biovitrum or SOBI is the second largest pharmaceutical manufacturer in Sweden and biotechnology company focused on hemophilia and other generic disease, implemented global price management or GPM and contact lifecycle management or CLM. Model N Revenue Cloud for Pharma is particularly critical ingredient for SOBI since they operate in 25 countries and conduct business in over 60 countries.
Sandoz, the generic division of Novartis went live with our government pricing and discontinue of our location application. Sandoz has massive transaction volumes and extremely complex discount relocation and government pricing calculation.
Now 100% of all Medicaid, Medicare, V.A., and Public Health Service calculations are pricing our managing and Revenue Cloud for Pharma. In conclusion this was another record quarter for Model N.
We're making great progress in our strategy growth objectives and helping our customers with the digital reinvention strategies. With our third consecutive quarter of positive adjusted EBITDA, positive cash flow, and much more favorable debt structure we are well on our way towards improving our profitability and cash flow profile while also delivering strong top line recurring revenue growth.
With that I will turn the call over to David.
David Barter
Thank you Zack. This was another strong quarter for Model N.
There were a number of highlights including SaaS and maintenance revenues, gross margin, adjusted EBITDA, and of course cash flow. As a reminder the primary way we measure the business is through SaaS and maintenance.
In the second quarter SaaS and maintenance revenues were $33 million and included in this is approximately $24 million of recurring revenue and $9 million of professional services related to the implementation of SaaS subscriptions. License and implementation revenues were $6.2 million, a $500,000 decline from the prior quarter.
This was in line with our expectations and it reflects the business model transition as well as the strength of our drive towards 100% SaaS. License and implementation revenues in Q1 and you will see a sequential decline in Q3 in a much more meaningful sequential decline in Q4 as we burn down the backlog.
Total revenues for the second quarter were $39.2 million, an 18% increase from $33.3 million in total revenues in the year ago period and above our guidance range of $38 million to $38.5 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 second quarter was $23.2 million compared to $20.4 million in the second quarter of fiscal year 2017.
Overall non-GAAP gross margin in the quarter was 59% compared to 58% in Q2 of last year which reflect the strength in our SaaS and maintenance. Non-GAAP operating expense was $20.9 million in Q2 compared to $25.8 million in Q2 of last year and $21.9 million in the prior quarter.
Non-GAAP operating profit for the period was $2.2 million compared to a loss of $5.3 million in Q2 of last year. Non-GAAP net income in the second quarter was $732,000 compared to a net loss of $7 million in the second quarter of last year.
We produced a non-GAAP net income per share of $0.02 based on 30 million shares compared to a net loss per share of $0.25 based on 28.5 million shares in the second quarter of last year. This was well ahead of our guidance of non-GAAP net loss of $0.03 to $0.05 per share.
Adjusted EBITDA for the second quarter was positive $3 million, a meaningful improvement compared to the negative $4.4 million in the year ago period and well ahead of our guidance range of $1 million to $1.5 million. At the end of the second quarter total deferred revenue was $56.6 million.
Our Q2 results reflect persisting growth in our SaaS subscription and then the seasonality in our maintenance and support which is traditionally strongest in our fiscal Q1 due to the renewal cycle. As a reminder deferred revenue and calculated billings are not perfect measures for our business as it's not uncommon in Life Sciences for some customers quarterly.
We ended the second quarter with fifty $55.2 million of cash and cash equivalents up from $48.3 million at the end of the first quarter. Cash flow from operations was $4.7 million.
This compares to cash flow used in operations of negative $5.4 million in the second quarter of last year. I also want to discuss our recent debt refinancing and the positive impact it will have on our business in the coming years.
With this refinancing Model N will realize an immediate 45% reduction in the LIBOR margin and will improve to a 64% reduction over time. The 45% reduction in the LIBOR margin translates to an annual reduction in cash interest payments and expense of approximately $1.9 million.
Our new facility with Wells Fargo is comprised of a term loan of $50 million and then we added a revolver of $5 million. The prior term loan had an interest rate of LIBOR plus 8.25%.
Under the new credit agreement, the loan initially will bear an interest rate of LIBOR plus 4.5% and then the rate will step down to LIBOR plus 3% with improvements in the company's leverage ratio. We anticipate the new term loan will reduce our cash interest payment by approximately 300,000 in Q3 and then approximately 475,000 in Q4.
In the third quarter of fiscal 2018 we also expect to incur a one-time non-cash charge of approximately $1.7 million related to unamortized discounts and deferred financing cost from the old term loan and then a $1.5 million cash prepayment penalty. Both will be included in our Q3 interest expense.
Before I provide guidance for Q3 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 the financial management of the business. We remain focused on several key initiatives; one , transitioning the business to 100% SaaS.
For fiscal year 2018 we still expect SaaS maintenance revenues to be between 86% and 88% of total revenues and more importantly we expect it will be well above 90% in Q4 in line with what Zack shared earlier on the organization's focus. The On-Premise professional services backlog is approximately $6 million for the second half of the year and we expect our license and implementation revenues to take a step down sequentially in Q3 and then a much more meaningful step down in Q4.
Two, we feel extremely confident in meeting our commitment to be profitable in each quarter. The entire company is focused on growing the business while delivering meaningful levels of profit.
Adjusted EBITDA was strong again in Q2 and we're driving the business to deliver healthy profit in Q3 and Q4. Three, building the business to generate sustainable levels of cash flow, we expect to improve free cash flow by approximately $10 million in fiscal year 2018 compared to fiscal year 2017.
We generated positive free cash flow in Q2 and further we now expect to generate free cash flow in both Q3 and Q4. We will also be paying down our debt by $5 million at the beginning of July in line with the terms of the settlement.
With the improved outlook for the company we are also planning to reduce our debt by another $5 million in approximately six months. Moving on let me outline our guidance for the third quarter of fiscal year 2018 as well as for the full year.
For our third quarter ending June 30, 2018 we expect total GAAP revenues to range from $39 million to $39.5 million. Non-GAAP income from operations is expected to be in the range of $1.2 million to $1.7 million.
This would lead to a non-GAAP net loss per share in the range of $0.11 to $0.09 based on a weighted average share count of 30.6 million shares. As a reminder our non-GAAP net loss includes the onetime non-cash charge of approximately $1.7 million and the $1.5 million cash prepayment penalty associated with our debt refinancing I just mentioned.
Adjusted EBITDA is expected to be in the range of $2 million to $2.5 million. For the full year of fiscal 2018 we are raising our guidance and now expect total GAAP revenues to range from $152 million to $154 million.
As we transition the business to 100% SaaS and maintenance we expect license and implementation revenues to be approximately $5 million in Q3 and to burn through the remainder of the backlog in Q4. As you know we have a small number of On-Premise implementation contracts some of which are fixed price which contributes to the step down we're seeing in revenues and the quarter-to-quarter variability.
We now expect non-GAAP income from operations in the range of $5.8 million to $6.8 million and non-GAAP loss per share in the range of $0.07 to $0.05 based on a weighted average share count of 30.2 million shares. We are also raising our guidance for adjusted EBITDA, it is now expected to be in the range of $9 million to $10 million and it reflects the one-time costs we will incur in Q4 as we transition customers and optimize our business around one cloud platform.
Therefore our Q4 adjusted EBITDA exit rate will not be reflective of the underlying adjusted EBITDA run rate of our business. We believe our business is set up very well for improved levels of profitability and cash flow in fiscal year 2019 in line with what we discussed at Analyst Day.
Overall Q2 marked substantial progress towards achieving our objectives. We are pleased with our progress and we anticipate the investments we are making will yield the expected levels of growth, profit, and cash flow.
Now I'd like to turn the call back to Zack for some closing remarks.
Zack Rinat
Thank you David. A few months ago in November 2016 I reassumed the CEO position on an interim basis because of my commitment and sense of responsibility to our customers, employees, and shareholders.
As the founder of Model N I consider many of the people that put their trust in me, customers, employees, and investors as my second family although my wife will claim my first. I am beyond proud of what we were able to accomplish over the last 18 months and over the last 18 years as a team.
Today Model N is a different company positioned for success financially, operationally, and strategically. The financial results and the debt refinancing announced today are testament to the transformation of our financial profile.
The customer wins and go-lives are testaments to the strategic progress of the company. Finally, the addition we made to the Executive Leadership team over the last 18 months including David Barter as Chief Financial Officer and Neeraj Gokhale as Chief Product Officer provide additional leadership to carry the company forward.
As it was becoming clear that we were getting back on the right track I have been working closely with the Board to identify the right person to become the permanent CEO of Model N. We were looking for a leader with previous cloud enterprise software CEO experience based in the Bay Area with demonstrated leadership in driving product and to go to market strategies and with proven record of scaling and delivering financial results.
I'm very excited to announce that effective Thursday, May 10th Jason Blessing will join Model N as our Chief Executive Officer. I will resign as Interim CEO and as a Board Member and will be moved to a Strategic Adviser dedicating myself to ensure a smooth transition.
Chuck Robel who has been a Board Member at Model N for over 10 years and has extensive public Board and Chairman experience in companies such as GoDaddy, Palo Alto Network, McAfee, and Autodesk to name a few will become the Chairman of the Board. Jason had a successful five year tenure as the CEO of Plex Systems, an industry leading cloud ERP and manufacturing automating solution provider to nearly 600 companies.
Plex pioneered cloud solutions for the shop floor. Jason laid the transformation of Plex System to pure cloud company while delivering strong growth.
Prior to Plex Jason had number of executive positions at Taleo, an HR cloud company, during a period of rapid growth, which culminated in a $2.1 billion acquisition by Oracle. Jason also held several executive positions at PeopleSoft after starting his career with PWC’s management consulting practice.
The Board and I believe that we hired an exceptional leader and we are confident that Jason will take Model N to new heights in the years ahead as a 100% SaaS company. I remain fully committed to Model N's long-term success and look forward to working with Jason as the new leader of Model N.
With this I would like to turn this over to Jason to say a few words before opening for questions and answer for Dave and myself.
Jason Blessing
Thank you Zack, I appreciate that gracious introduction and sincerely appreciate your commitment to work with me on a successful transition that will benefit our customers, employees, and investors. I am very pleased to be joining Model N.
Model N is uniquely positioned to help companies with their digital reinvention journey. The company has made tremendous progress on shifting its business model to software as a service.
I look forward to leveraging my experience meeting successful SAAS businesses to help the company complete this journey. With a blue chip customer base, the leading revenue management platform, and an outstanding team the company has built a solid foundation to drive customer success, growth, and scale across the business.
I look forward to getting to know our analysts and investors during conversations after the earnings call. In addition I will be on the road with Zack and David starting next week at several upcoming Investor events to meet you in person.
So again, thank you Zack and the rest of the Model N team for the incredibly warm welcome. With that I'll turn it back over to you Zack.
Zack Rinat
Thank you Jason. Operator, we will now open the call for questions.
Operator
[Operator Instructions]. Our first question today is coming from Steven Wardell from Chardan Capital Markets.
Your line is now live.
Steven Wardell
Thank you and congrats on the quarter.
Zack Rinat
Thank you.
Steven Wardell
So adjusted EBITDA was above the estimate, can you just summarize what do you think was the main reason for that date?
David Barter
Sure thing, Steve. I think as we've mentioned at both Analyst Day and just even on previous calls I think we're very focused on driving growth but we're also kind of with that very focused on driving very profitable growth.
And I think what I had outlined in Analyst Day, I think we're working kind of across the P&L both in terms of cost of revenue and operating expense to just continue to get more efficient and getting good scale. And so I don't know that there was just one thing Steve I think we saw kind of just good positive traction across many areas of the business.
And so we're -- we continue to be very pleased with the profitability that we're seeing.
Zack Rinat
And as we scale the company forward we believe that there we can continue to as David mentioned both grow and make the business more efficient. It is coming in the gross margins where we can get actually more efficient actually with our cloud operations as we kind of noise the scale and consolidate as well as with the operating aspect of kind of north of the business.
There's something that David mentioned, we're committed to both growth and profitability.
Steven Wardell
Great, thank you and what are you hearing from buyers in the marketplace, are their budgets strong in 2018-2019 for your products and are there -- which of your products are they most interested in and what are the trends you're seeing in terms of their demand?
Zack Rinat
Yeah the markets for Revenue Management is strong. If you look at some of the high level messages that we communicated in the Analyst Day we believe that we have a couple of big market opportunities in front of us.
Just realize that based on our estimates the Life Sciences and the High Tech verticals alone have a market potential of about $4 billion in ARR. Then we look at that the next level opportunities for the company, the first one is for what we call SaaS OPT which is really the transition of our customers from On-Premise to kind of move to SaaS.
We announced one this quarter which is AstraZeneca but this is by itself its $110 million opportunity in ARR. And specifically about this opportunity we see more and more companies realize the benefit of the cloud and as leaders like AstraZeneca and like Gilead and variety of others completed this acquisition and we believe that over time all of our customers are going to move to the cloud.
And then the next opportunity that we have is for cross sell and up sell and we have an ability right now to take their broad product line that we have and up sell to kind of not to our customers. So in general when I look at kind of the major trends right now in the industry both from a business point of view and then from a technology point of view, the need for revenue management is clear and we feel confident about the strength of the market.
Operator
Thank you, our next question is coming from Brian Peterson from Raymond James. Please proceed with your question.
Brian Peterson
Thanks gentlemen and congrats on the strong results and Jason welcome to the call and Zack we will miss talking with you. but I think we will give this question to Zack, obviously when you came back on Board in 2016 you still had the Chairman role.
In this succession or transition plan looks like you're just taking a role of strategic advisor, any thoughts on the decision maybe to not stay on as Chairman or if anything you can add to the transition plan there?
Zack Rinat
Yeah, absolutely thanks for the question. I would say three things about that.
A) I think that I am extremely excited about being dedicated a 100% of my time to ensure a smooth transition. I think that my ability to have this dedication and not be interrupted by other activities such as the Board activities is going to enhance the company's ability to go into a drive as they transition in the best kind of possible way.
That's one aspect of that. I think that the second aspect of that is that when you look at my interest and my skill set and the way that I want to move forward is I am a lot more passionate about product and customers and being with the employees and the customers.
A lot of them on governance and other aspects of the cutting off the business. So, I am very excited to move to this position and work closely with Jason as he take over the company.
Brian Peterson
Great, thanks Zack and Jason welcome aboard. And maybe David one for you quickly, just on the gross margin expectations how should we be thinking about the line to recurring revenue margins, just think about the back half of the year and into 2019, thanks guys?
David Barter
Yeah, it's a great question. I think its one where and I think I suggested this on the call we're pretty positive about all the momentum we have with customers and so I think what we've shared is that we have some opportunities to optimize our cloud as we drive all customers to one cloud platform.
And so we will be shutting down some of the legacy environments and incurring some costs and I think that ultimately sets us up for quite frankly the gross margins that we talked about at Analyst Day. And so I think they will remain healthy in Q3 but I will incur some extra royalties as I turn off old contracts and incur some onetime cost and customer migration.
But I think that's all good momentum that really sets us up for quite frankly much better profitability next year and keeps us very much tracked into the plan that I outlined.
Brian Peterson
Got it, thanks David.
Operator
Thank you, our next question is coming from Jackson Ader from JP Morgan. Your line is now live.
Jackson Ader
Thanks, hey guys. Zack first of all also I would like to echo congratulations for the big step.
But I am also reminded that a couple of years ago when we tried a similar move and Jason no need to listen to this, it didn't go so well the last time around so Zack how do we ensure that this transition is going to be a little bit different from 2016?
Zack Rinat
No, I think it’s a great question. So couple of things, first of all when you look at Jason's credentials and his kind of background, he comes to us with a very strong experience as a CEO for five a five years.
He also comes to us with a very strong background in the enterprise and software in successful companies such as Taleo and most recently Plex Systems. He has a wide experience in all the operating part of the business; in services, in product, in sales, and in the marketing very extensive operating ability.
He's based in the Bay Area and he is what I consider to be a Silicon Valley insider. More than this if you look at his growth both as a General Manager and the CEO, he consistently delivered exceptional financial results.
And so the first one is just go to Jason and his credentials. The second aspect of this is if you look at how we are doing the transition this time, I'm not going to be consumed by anything such as Board activities and governance I'm going to dedicate 100% of my time to work with Jason and the management team to ensure that we do it in the best kind of possible way.
And we are very committed to work with each other until we get there kind of new until we get it right and so on. So I personally believe that we hire an exceptional leader, that we have very detailed position plan, and that we are committed to work with each other to do it right.
Jackson Ader
Alright, thank you for that. And then one follow-up for you David.
At the Analyst Day you provided some additional color on ARR growth and the split between growth from existing customers and growth for new customers. And I was just wondering how that's been tracking so far in 2018?
David Barter
When I think about how we're tracking but as well as the funnel and thinking about the full year I think our mix will be in line with prior years. So I'm very pleased in terms of how we're pulling offense.
Jackson Ader
Okay, alright, fair enough, thank you.
David Barter
Absolutely, thank you Jackson.
Operator
[Operator Instructions]. Our next question is coming from Chad Bennett from Craig Hallum.
Your line is now live.
Chad Bennett
Great guys, thanks for taking my question. Once again another good quarter.
Zack, it's been phenomenal working with you over the years and I think when you've been at the helm I mean the company has executed I think really, really well and you are one of the most kind of customer facing roll up your sleeves CEO's that I deal with and I think that's a good thing, you have to be at this scale. But you've kind of been the face of the company, right for many, many years and what we've been trying to kind of get through in your main vertical, the Life Sciences vertical is and I think you've been crucial in this is getting that large installed base over the hump, transition from On-Prem to the cloud.
And that's certainly been a process but I -- maybe I'm giving you too much credit but I think you've been crucial in this process. I guess long winded way should we read into this, you feel like the Life Sciences customers you deal with are maybe over the hump is too strong of a word but you're comfortable that they're comfortable making this cloud transition and you no longer need to hold their hand, any comment on that?
Zack Rinat
Yeah, absolutely and thanks for the question. When you look at the company and even you look at the announcement that we have today with AstraZeneca completing their deposition, the company that is processing a billion dollar of rebate a month in the cloud.
And a company that is running its entire global business in the U.S. and across the world on a single out of the box SaaS platform, it gives you an indication of where the industry is.
In addition to that when you look at our own progress and when you look at the revenue stream for Model N and the fact that in Q4 we are going to do well above 90% in our account. Second line it gives you another indication of where it is and I think that you are right about me being kind of load bearing in the kind of in the front line.
But at the same time I believe that what the company did to do right now is the ability to scale in a different, kind of on a different way. And this is I think where Jason is going to bring his expertise and I think that the transition from top overall leadership to leadership that is going to scale the business is a different way.
It is very kind of very paramount. So I'm very committed to work with Jason and to do all the kind of the knowledge transfer.
We are going to ensure that we are going to have the best hand off with customers. We're trying to engage with all of our customers and we are going to go on the road starting next week to engage with them.
And I think the combination of the knowledge transfer and the documentation as well as the scalability that Jason is going to bring to the company I think it's a winning formula for the company as we move forward.
Chad Bennett
Okay, maybe one quick one for Jason I guess if I could. Welcome aboard Jason first of all.
I guess so Jason can you talk about kind of your background at Plex and I understand it's a private company so you can't probably say too much but just kind of the growth and the scale that you experienced kind of the growth of the company over the five years that you've ran it? And then maybe whether it's Plex or Taleo or somewhere else kind of your Life Sciences experience in particular selling into that space?
Jason Blessing
Yeah, thank you Chad appreciate the welcome from you and all the other folks. So yeah, I mean Plex is a private company.
I was there for five years. As a private company they're pretty particular about disclosing some of the growth metrics but it did grow significantly during the time I was there.
I think the Taleo though is probably the better one to point to because it is a public company and this was all fully disclosed. But Plex is about $100 million company, excuse me, Taleo was about $100 million company when I joined a little over that.
And of course we grew it to over $400 million run rate during the time I was there. And ultimately with the exit of selling the company to Oracle.
And so I think the key message there is when you put bio and Plex together. Both of them equate to 10 years plus of executive experience at cloud companies that went through significant growth and dealt with big complex enterprises.
And I would say Taleo as well we had a lot of overlap with the pharmaceutical companies. That model end sells do, so from that perspective it also felt comfortable but more generally speaking it just felt like Model N was at a really interesting inflection point as Zack and the team have successfully shifted the business model, the software as a service and my 10 plus years of leading cloud businesses and scaling them it just it felt like a great fit and more importantly a great time to join Model N.
Chad Bennett
Got it, I appreciate the color there. And then maybe one last one for David if I could, so David you've effectively have guided for three quarters of the year with the June quarter guide as you know call it 39 million in change in revs.
To get down to the top-end of your revenue guide for the year your revenue in the September quarter would have to be down from 39 million, fairly decently sequentially, why would that be?
David Barter
It is a great question and I guess I think we are -- Chad as we discussed at Analyst Day and I am trying to reinforce today, I mean we're pretty excited about what we're seeing in SaaS and maintenance and quite frankly the wrap up and the end of the back log and license and implementation. And so what you will see in Q3 again is approximately about 5 million of license and implementation and then a pretty substantial step down.
And that's why I gave that color around about it. If you recall the backlog that I had shared in our last call, the backlog almost is exactly move forward the way we expect.
And what you will see is that backlog has hit 6 million, about 5 million will happen in Q3, and then again about 1 million will happen in Q4. And so that backlog is just playing out.
And so -- and we're pretty excited about the underlying growth in SaaS and maintenance and again obviously serving the legacy on prim customers and wrapping up that work.
Chad Bennett
Okay, thanks guys.
David Barter
So you are going to see that step down.
Chad Bennett
Perfect, I appreciate the color. Thanks guys, nice job again.
Operator
Thank you. We reached the end of our question-and-answer session.
I'd like to turn the floor back over to management for any further or closing comments.
David Barter
We don't have any further comments, thank you very much for joining the call.
Zack Rinat
Thank you and appreciate all the support.
Operator
Ladies and gentlemen this does conclude today's teleconferencing. You may disconnect your lines at this time and have a wonderful day.
We thank you for your participation today.