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Why Is Model N (MODN) Up 0.8% 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 added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Model N 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.
Model N Q2 Earnings and Revenues Top Estimates
Model N reported second-quarter fiscal 2020 non-GAAP earnings of 7 cents per share, which surpassed the Zacks Consensus Estimate by 250% and improved 600% year over year.
Revenues came in at $40 million, which beat the Zacks Consensus Estimate by 5% and increased 15% year over year. The figure was also higher than the guided range of $38.8-$39.2 million.
Robust adoption of the company’s revenue cloud platform drove the top line. Notably, a leading Asia-based pharmaceutical company and generics division of Mallinckrodt Pharmaceuticals completed their transition to Model N’s Revenue Cloud platform during the quarter under review.
Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is aiding top-line growth.
Quarter in Detail
Model N reports earnings under two business lines — Subscription and Professional Services.
In second-quarter fiscal 2020, Subscription revenues were $29 million, up 12% year over year. This was driven by strong Go to Market execution and new logo additions.
Professional Services revenues increased 23% on a year-over-year basis to $11 million.
Operating Details
Non-GAAP gross margin expanded 580 basis points (bps) from the year-ago-figure to 62.1%. Non-GAAP subscription gross margin during the reported quarter expanded 200 bps year over year to 72%.
Adjusted EBITDA during the quarter came in at $3.2 million, up 76%year over year.
Non-GAAP operating income was $3 million, up 102% year over year. Non-GAAP operating margin (as a percentage of total revenues) expanded 330 bps to 7.6%.
Balance Sheet & Cash Flow
As of Mar 31, 2020, Model N had cash and cash equivalents of $61.3 million compared with $55.8 million as of Dec 31, 2019.
As of Mar 31, 2020, the company had total debt (including current portion) of $39.4 million, compared with $44.3 million reported as of Dec 31, 2019.
Net cash flow from operating activities was $3.4 million for the first six months ended Mar 31, 2020, compared with $0.5 million in the prior-year period. Free cash flow was reported at $3.3 million for the first six months of fiscal year 2020, compared with free cash flow of $0.3 million in the prior-year period.
Guidance
The company anticipates fiscal third-quarter 2020 total revenues between $39.4 million and $39.8 million. Subscription revenues are anticipated in the range of $28.7-$29.1 million.
Non-GAAP net income is anticipated in the range of 5-7 cents per share.
Adjusted EBITDA is anticipated between $3.4 million to $3.8 million.
For fiscal 2020, Model N expects total revenues in the range of $154-$156 million. Fiscal 2020 subscription revenues are projected in the range of $114-$115 million.
Non-GAAP earnings are expected in the range of 28-31 cents per share.
Adjusted EBITDA is projected in the range of $14 million to $15 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 7.56% due to these changes.
VGM Scores
At this time, Model N has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 C. 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. Notably, Model N has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Model N (MODN) Up 0.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Model N (MODN - Free Report) . Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Model N 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.
Model N Q2 Earnings and Revenues Top Estimates
Model N reported second-quarter fiscal 2020 non-GAAP earnings of 7 cents per share, which surpassed the Zacks Consensus Estimate by 250% and improved 600% year over year.
Revenues came in at $40 million, which beat the Zacks Consensus Estimate by 5% and increased 15% year over year. The figure was also higher than the guided range of $38.8-$39.2 million.
Robust adoption of the company’s revenue cloud platform drove the top line. Notably, a leading Asia-based pharmaceutical company and generics division of Mallinckrodt Pharmaceuticals completed their transition to Model N’s Revenue Cloud platform during the quarter under review.
Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is aiding top-line growth.
Quarter in Detail
Model N reports earnings under two business lines — Subscription and Professional Services.
In second-quarter fiscal 2020, Subscription revenues were $29 million, up 12% year over year. This was driven by strong Go to Market execution and new logo additions.
Professional Services revenues increased 23% on a year-over-year basis to $11 million.
Operating Details
Non-GAAP gross margin expanded 580 basis points (bps) from the year-ago-figure to 62.1%. Non-GAAP subscription gross margin during the reported quarter expanded 200 bps year over year to 72%.
Adjusted EBITDA during the quarter came in at $3.2 million, up 76%year over year.
Non-GAAP operating income was $3 million, up 102% year over year. Non-GAAP operating margin (as a percentage of total revenues) expanded 330 bps to 7.6%.
Balance Sheet & Cash Flow
As of Mar 31, 2020, Model N had cash and cash equivalents of $61.3 million compared with $55.8 million as of Dec 31, 2019.
As of Mar 31, 2020, the company had total debt (including current portion) of $39.4 million, compared with $44.3 million reported as of Dec 31, 2019.
Net cash flow from operating activities was $3.4 million for the first six months ended Mar 31, 2020, compared with $0.5 million in the prior-year period. Free cash flow was reported at $3.3 million for the first six months of fiscal year 2020, compared with free cash flow of $0.3 million in the prior-year period.
Guidance
The company anticipates fiscal third-quarter 2020 total revenues between $39.4 million and $39.8 million. Subscription revenues are anticipated in the range of $28.7-$29.1 million.
Non-GAAP net income is anticipated in the range of 5-7 cents per share.
Adjusted EBITDA is anticipated between $3.4 million to $3.8 million.
For fiscal 2020, Model N expects total revenues in the range of $154-$156 million. Fiscal 2020 subscription revenues are projected in the range of $114-$115 million.
Non-GAAP earnings are expected in the range of 28-31 cents per share.
Adjusted EBITDA is projected in the range of $14 million to $15 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 7.56% due to these changes.
VGM Scores
At this time, Model N has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 C. 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. Notably, Model N has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.