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Model N (MODN) Up 2.1% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Model N, Inc. (MODN - Free Report) . Shares have added about 2.1% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Model N posted adjusted loss (including all one-time expenses but including stock-based compensation) of $0.21 per share narrower than the Zacks Consensus Estimate of a loss of $0.29 as well as the year-ago quarter’s loss of $0.26.
On a non-GAAP basis (excluding stock-based compensation), Model N reported loss of $0.15, which was better than the guided range of loss of $0.16–$0.18. Further, it was $0.01 lower than the year-ago quarter’s loss of $0.16.
The year-over-year improvement in the bottom line was mainly driven by higher revenues and efficient cost management, which were partially offset by increased share count.
Quarter in Detail
The company’s revenues of $28.1 million for the quarter not only increased 14.6% year over year but also came ahead of the guided range of $27.2–$27.7 million as well as the Zacks Consensus Estimate of $27 million.
Model N has two reportable segments namely – License and Implementation and SaaS and Maintenance.
In the first quarter, License and Implementation revenues of $5.4 million grew 18.9% on a year-over-year basis, while SaaS and Maintenance revenues of $22.6 million grew 13.6% year over year. License and Implementation constituted 19.3% of total revenue, while SaaS and Maintenance comprised the remaining 80.7%.
The company remains on track to shift its business model to a 100% SaaS and Maintenance revenue model.
Adjusted gross profit increased 18.5% year over year to $14.5 million while margin improved 170 basis points (bps) to 51.7%.
Although adjusted operating expenses increased 14.7% year over year to $23.2 million, but as a percentage of revenues it remained almost flat at 82.6%. Adjusted operating loss was $6.1 million compared with a loss of $6.9 million in the year-ago quarter.
Balance Sheet
Model N exited the quarter with cash and cash equivalent balance of $52.4 million, down from $66.1 million at the end of the previous quarter. Accounts receivable were $19.3 million, slightly down from $19.9 million at the end of fourth-quarter fiscal 2016. During the quarter, the company used $8.2 million of cash toward operational activities.
Guidance
Bouyed by better-than-expected first-quarter results and the recently completed acquisition of Revitas, Model N raised its fiscal 2017 revenue outlook and lowered non-GAAP loss projection.
The company now forecasts revenues in a range of $130–$134 million, up from its previous guidance range of $105–$107 million. Non-GAAP loss is now projected to come between $0.66 and $0.69, lower than its earlier projected loss range of $0.70–$0.73.
Further, Model N provided strong guidance for the second quarter. The company expects revenues to come in a range of $33.5–$34 million. This takes into account GAAP revenues excluding the deferred revenue impact of the Revitas deal.
Non-GAAP operating loss is projected to be between $6 million and $6.5 million. Non-GAAP net loss is likely to be between $0.26 and $0.28 per share in the second quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two downward revisions for the current quarter. In the past month, the consensus estimate shifted 12.9% downward due to these changes.
At this time, the Model N's stock has an average Growth Score of 'C', however its Momentum is doing a bit better with a 'B'. However, the stock was allocated a grade of 'F' on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.
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Model N (MODN) Up 2.1% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Model N, Inc. (MODN - Free Report) . Shares have added about 2.1% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Model N posted adjusted loss (including all one-time expenses but including stock-based compensation) of $0.21 per share narrower than the Zacks Consensus Estimate of a loss of $0.29 as well as the year-ago quarter’s loss of $0.26.
On a non-GAAP basis (excluding stock-based compensation), Model N reported loss of $0.15, which was better than the guided range of loss of $0.16–$0.18. Further, it was $0.01 lower than the year-ago quarter’s loss of $0.16.
The year-over-year improvement in the bottom line was mainly driven by higher revenues and efficient cost management, which were partially offset by increased share count.
Quarter in Detail
The company’s revenues of $28.1 million for the quarter not only increased 14.6% year over year but also came ahead of the guided range of $27.2–$27.7 million as well as the Zacks Consensus Estimate of $27 million.
Model N has two reportable segments namely – License and Implementation and SaaS and Maintenance.
In the first quarter, License and Implementation revenues of $5.4 million grew 18.9% on a year-over-year basis, while SaaS and Maintenance revenues of $22.6 million grew 13.6% year over year. License and Implementation constituted 19.3% of total revenue, while SaaS and Maintenance comprised the remaining 80.7%.
The company remains on track to shift its business model to a 100% SaaS and Maintenance revenue model.
Adjusted gross profit increased 18.5% year over year to $14.5 million while margin improved 170 basis points (bps) to 51.7%.
Although adjusted operating expenses increased 14.7% year over year to $23.2 million, but as a percentage of revenues it remained almost flat at 82.6%. Adjusted operating loss was $6.1 million compared with a loss of $6.9 million in the year-ago quarter.
Balance Sheet
Model N exited the quarter with cash and cash equivalent balance of $52.4 million, down from $66.1 million at the end of the previous quarter. Accounts receivable were $19.3 million, slightly down from $19.9 million at the end of fourth-quarter fiscal 2016. During the quarter, the company used $8.2 million of cash toward operational activities.
Guidance
Bouyed by better-than-expected first-quarter results and the recently completed acquisition of Revitas, Model N raised its fiscal 2017 revenue outlook and lowered non-GAAP loss projection.
The company now forecasts revenues in a range of $130–$134 million, up from its previous guidance range of $105–$107 million. Non-GAAP loss is now projected to come between $0.66 and $0.69, lower than its earlier projected loss range of $0.70–$0.73.
Further, Model N provided strong guidance for the second quarter. The company expects revenues to come in a range of $33.5–$34 million. This takes into account GAAP revenues excluding the deferred revenue impact of the Revitas deal.
Non-GAAP operating loss is projected to be between $6 million and $6.5 million. Non-GAAP net loss is likely to be between $0.26 and $0.28 per share in the second quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two downward revisions for the current quarter. In the past month, the consensus estimate shifted 12.9% downward due to these changes.
Model N, Inc. Price and Consensus
Model N, Inc. Price and Consensus | Model N, Inc. Quote
VGM Scores
At this time, the Model N's stock has an average Growth Score of 'C', however its Momentum is doing a bit better with a 'B'. However, the stock was allocated a grade of 'F' on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.