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Model N (MODN) Earnings and Revenues Beat Estimates in Q1

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Model N, Inc. (MODN - Free Report) reported first-quarter fiscal 2021 non-GAAP earnings of 16 cents per share, which surpassed the Zacks Consensus Estimate by 128.6%. The bottom line also increased 33.3% year over year.

Revenues were $42.7 million, which beat the Zacks Consensus Estimate by 5.4% and increased 11% year over year.

Robust adoption of the company’s revenue management solutions drove the fiscal first-quarter top line. Model N’s Revenue Cloud aids organizations with enhanced efficiency, visibility and transparency in reporting.

Model N, Inc. Price, Consensus and EPS Surprise

 

Model N, Inc. Price, Consensus and EPS Surprise

Model N, Inc. price-consensus-eps-surprise-chart | Model N, Inc. Quote

 

Driven by better-than-expected first-quarter fiscal 2021 results, shares of Model N are up more than 18.5% in the pre-market trading on Feb 10. In the past year, shares of Model N have gained 21.7% compared with the industry’s surge of 106.3%.

Quarter Details & Business Highlights

Model N reports earnings under two business lines — Subscription and Professional Services.

In first-quarter fiscal 2021, Subscription revenues (73.6% of total fiscal first-quarter revenues) were $31.4 million, up 12% year over year.

Professional Services revenues (26.4%) increased 11% on a year-over-year basis to $11.3 million.

Notable companies like Johnson & Johnson’s U.S. pharma division and Fresenius selected Model N’s Revenue Cloud.

In the fiscal first quarter, Bristol-Myers Squibb went live with Model N’s solutions, including Global Launch Excellence and Global Pricing Management analytics to enhance international pricing and compliance.

Also, Micron went live with implementation of Model N Rebate Management offering to automate manual processes as well as improve channel programs’ efficacy and boost partner engagement, noted Model N.

Touching upon the acquisition of Deloitte’s life sciences pricing and contracting solutions business, Model N added that the buyout will boost its total addressable market by 40% owing to the addition of the pre-commercial segment. The underlying technology of the Deloitte’s acquired division will be fused with Model N’s products, going ahead.

Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is driving the top line.

Operating Details

Non-GAAP gross margin expanded 220 basis points (bps) from the year-ago quarter’s figure to 63.4%. Non-GAAP subscription gross margin expanded 200 bps from the prior-year quarter’s levels to 74% on higher revenue base. Non-GAAP Professional services gross margin expanded 300 bps from the year-ago quarter’s figure to 34%.

Adjusted EBITDA during the quarter was $7.5 million, up 55% year over year.

Non-GAAP operating income was $7.3 million, up 59% year over year. Non-GAAP operating margin (as a percentage of total revenues) expanded 520 bps to 17.2%.

Balance Sheet

As of Dec 31, 2020, Model N had cash and cash equivalents of $143.5 million compared with $200.5 million as of Sep 30, 2020.

As of Dec 31, 2020, the company had long term debt of $116.8 million compared with $114.4 million reported as of Sep 30, 2020.

In the quarter under review, net cash used in operating activities was $0.2 million compared with $5 million of net cash used in operating activities in the first quarter of fiscal 2020.

Free cash outflow was $0.6 million for the fiscal first quarter compared with free cash outflow of $5 million in the year-ago quarter.

Guidance in Detail

The company anticipates fiscal second-quarter 2021 total revenues between $46 million and $46.5 million. The Zacks Consensus Estimate for revenues is pegged at $41.8 million.

For second-quarter fiscal 2021, subscription revenues are projected in the range of $34.5-$35 million. Adjusted EBITDA is expected between $(0.5) million and breakeven.

Non-GAAP loss per share is anticipated in the range of 5-6 cents per share. The Zacks Consensus Estimate for earnings is pegged at 5 cents per share.

For fiscal 2021, Model N revised its guidance to include the impact of the acquisition of Deloitte’s life sciences pricing and contracting solutions business. The company now expects total revenues in the range of $184-$186 million compared with earlier guidance of $170-$172 million. The Zacks Consensus Estimate for revenues is pegged at $171.3 million.

Non-GAAP earnings are expected to be 10-15 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 31 cents per share.

Fiscal 2021 subscription revenues are forecast in the range of $136-$138 million compared with the previous guidance of $122- $124 million.

Non-GAAP operating income is expected between $9.5 million and $11.5 million. Adjusted EBITDA is projected in the band of $10-12 million.

Zacks Rank & Stocks to Consider

Currently, Model N carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Shopify (SHOP - Free Report) , CrowdStrike (CRWD - Free Report) and Workday (WDAY - Free Report) . Shopify flaunts a Zacks Rank #1 (Strong Buy), while CrowdStrike and Workday carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Shopify, Workday and CrowdStrike are scheduled to release earnings on Feb 17, Feb 25 and Mar 16, respectively.

Long-term earnings growth rate for Shopify, CrowdStrike and Workday are currently pegged at 32.5%, 25%, and 25.4%, respectively.

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