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Why Is Model N (MODN) Down 1.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Model N (MODN - Free Report) . Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Model N due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Model N Q4 Earnings & Revenues Beat Estimates
Model N, Inc. reported fourth-quarter fiscal 2020 non-GAAP earnings of 14 cents per share, which surpassed the Zacks Consensus Estimate by 55.6%. The bottom line also improved 7.7% year over year.
Revenues were $41.5 million, which beat the Zacks Consensus Estimate by 2.6% and increased 13% year over year.
Robust adoption of the company’s revenue management solutions drove the fiscal fourth-quarter top line. Model N’s Revenue Cloud aids organizations with enhanced efficiency, visibility, and transparency in reporting.
Quarter Details & Business Highlights
Model N reports earnings under two business lines — Subscription and Professional Services.
In fourth-quarter fiscal 2020, Subscription revenues (71.6% of total fiscal fourth-quarter revenues) were $29.7 million, up 8% year over year. This was driven by strong go-to-market execution and new logo additions.
Professional Services revenues (28.4%) increased 28.6% on a year-over-year basis to $11.8 million.
Notable companies including, Merck & Co., Seqirus USA, Mallinckrodt and Octapharma, have selected Model N’s Revenue Cloud products. In the fiscal fourth quarter, Advanced Micro Devices, went live with full suite of Model N’s cloud solutions, with an aim to enhance pricing, quoting, and rebating activities and obtain more data-driven actionable intelligence into its channel.
Also, Servier Monde went live with implementation of Global Pricing Management offering in a bid to accelerate and enhance decision-making.
Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is driving top-line growth.
Operating Details
Non-GAAP gross margin expanded 130 basis points (bps) from the year-ago-figure to 63%. Non-GAAP subscription gross margin expanded 100 bps from the year-ago-figure to 74%.
Adjusted EBITDA during the quarter was $7 million, up 38%year over year.
Non-GAAP operating income was $6.8 million, up 41% year over year. Non-GAAP operating margin (as a percentage of total revenues) expanded 530 bps to 22.9%.
Balance Sheet & Cash Flow
As of Sep 30, 2020, Model N had cash and cash equivalents of $200.5 million compared with $192.4 million as of Jun 30, 2020.
As of Sep 30, 2020, the company had total debt (including current portion) of $114.4 million, compared with $112.2 million reported as of Jun 30, 2020.
Net cash flow from operating activities was $14.4 million for the fiscal year 2020 ended Sep 30, 2020, compared with $10.5 million in the fiscal year 2019. Free cash flow was reported at $13.8 million for the fiscal year 2020, compared with free cash flow of $10.2 million in fiscal year 2019.
Guidance
The company anticipates fiscal first-quarter 2021 total revenues between $40.2 million and $40.6 million. Fiscal first-quarter 2021 subscription revenues are projected to be $29.4-$29.8 million. Non-GAAP net income is anticipated in the range of 5-8 cents per share. Adjusted EBITDA is expected between $4.1 million and $4.5 million.
For fiscal 2021, Model N expects total revenues in the range of $170 million to $172 million. Fiscal 2021 subscription revenues are forecast in the range of $122 million to $124 million. Non-GAAP earnings are expected to be 27-35 cents per share. Adjusted EBITDA is projected in the band of $18-20 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -45.31% due to these changes.
VGM Scores
Currently, Model N has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Model N has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Model N (MODN) Down 1.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Model N (MODN - Free Report) . Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Model N due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Model N Q4 Earnings & Revenues Beat Estimates
Model N, Inc. reported fourth-quarter fiscal 2020 non-GAAP earnings of 14 cents per share, which surpassed the Zacks Consensus Estimate by 55.6%. The bottom line also improved 7.7% year over year.
Revenues were $41.5 million, which beat the Zacks Consensus Estimate by 2.6% and increased 13% year over year.
Robust adoption of the company’s revenue management solutions drove the fiscal fourth-quarter top line. Model N’s Revenue Cloud aids organizations with enhanced efficiency, visibility, and transparency in reporting.
Quarter Details & Business Highlights
Model N reports earnings under two business lines — Subscription and Professional Services.
In fourth-quarter fiscal 2020, Subscription revenues (71.6% of total fiscal fourth-quarter revenues) were $29.7 million, up 8% year over year. This was driven by strong go-to-market execution and new logo additions.
Professional Services revenues (28.4%) increased 28.6% on a year-over-year basis to $11.8 million.
Notable companies including, Merck & Co., Seqirus USA, Mallinckrodt and Octapharma, have selected Model N’s Revenue Cloud products. In the fiscal fourth quarter, Advanced Micro Devices, went live with full suite of Model N’s cloud solutions, with an aim to enhance pricing, quoting, and rebating activities and obtain more data-driven actionable intelligence into its channel.
Also, Servier Monde went live with implementation of Global Pricing Management offering in a bid to accelerate and enhance decision-making.
Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is driving top-line growth.
Operating Details
Non-GAAP gross margin expanded 130 basis points (bps) from the year-ago-figure to 63%. Non-GAAP subscription gross margin expanded 100 bps from the year-ago-figure to 74%.
Adjusted EBITDA during the quarter was $7 million, up 38%year over year.
Non-GAAP operating income was $6.8 million, up 41% year over year. Non-GAAP operating margin (as a percentage of total revenues) expanded 530 bps to 22.9%.
Balance Sheet & Cash Flow
As of Sep 30, 2020, Model N had cash and cash equivalents of $200.5 million compared with $192.4 million as of Jun 30, 2020.
As of Sep 30, 2020, the company had total debt (including current portion) of $114.4 million, compared with $112.2 million reported as of Jun 30, 2020.
Net cash flow from operating activities was $14.4 million for the fiscal year 2020 ended Sep 30, 2020, compared with $10.5 million in the fiscal year 2019. Free cash flow was reported at $13.8 million for the fiscal year 2020, compared with free cash flow of $10.2 million in fiscal year 2019.
Guidance
The company anticipates fiscal first-quarter 2021 total revenues between $40.2 million and $40.6 million. Fiscal first-quarter 2021 subscription revenues are projected to be $29.4-$29.8 million. Non-GAAP net income is anticipated in the range of 5-8 cents per share. Adjusted EBITDA is expected between $4.1 million and $4.5 million.
For fiscal 2021, Model N expects total revenues in the range of $170 million to $172 million. Fiscal 2021 subscription revenues are forecast in the range of $122 million to $124 million. Non-GAAP earnings are expected to be 27-35 cents per share. Adjusted EBITDA is projected in the band of $18-20 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -45.31% due to these changes.
VGM Scores
Currently, Model N has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Model N has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.