Model N, Inc. ( MODN Quick Quote MODN - Free Report) reported second-quarter fiscal 2021 non-GAAP earnings of 4 cents per share, which surpassed the Zacks Consensus Estimate of loss of 5 cents. However, the bottom line declined 43% year over year.
Revenues were $48.2 million, which beat the Zacks Consensus Estimate by 3.8% and increased 21% year over year.
Robust adoption of the company’s revenue management solutions drove fiscal second-quarter top line. Model N’s Revenue Cloud aids organizations with enhanced efficiency, visibility and transparency in reporting.
The acquisition of Deloitte’s Business Services unit also added $6.5 million to the top line.
In the past year, shares of Model N have gained 12.3% compared with the
industry’s surge of 41.8%. Quarter Details & Business Highlights
Model N reports earnings under two business lines — Subscription and Professional Services.
In second-quarter fiscal 2021, Subscription revenues (74.6% of total fiscal second-quarter revenues) were $35.9 million, up 24% year over year.
Professional Services revenues (25.4%) increased 12% on a year-over-year basis to $12.3 million.
The company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is driving the top line. Model N announced that Novartis moved forward with their plans to transition to Model Revenue Cloud for Life Sciences in the quarter under review.
In the fiscal second quarter, European division of a global biotech company went live with Model N’s solutions, including global pricing management and international reference pricing solutions.
In the high-tech vertical, Targus selected Model N Revenue Cloud for High Tech. Targus is engaged in designing innovative mobile computing accessories.
Non-GAAP gross margin contracted 500 basis points (bps) from the year-ago quarter’s figure to 57% mainly due to negative impact from buyout of Deloitte’s Business Services unit.
Non-GAAP subscription gross margin contracted 600 bps from the prior-year quarter’s levels to 66%. Non-GAAP Professional services gross margin contracted 600 bps from the year-ago quarter’s figure to 29%.
Adjusted EBITDA during the quarter was $3.2 million, down 0.2% year over year.
Non-GAAP operating income was $3 million, in line with the year-ago quarter’s levels. Non-GAAP operating margin (as a percentage of total revenues) contracted 130 bps to 6.3%.
As of Mar 31, 2021, Model N had cash and cash equivalents of $148.3 million compared with $143.5 million as of Dec 31, 2020.
As of Mar 31, 2021, the company had long-term debt of $119.2 million compared with $116.8 million reported as of Dec 31, 2020.
In the quarter under review, net cash provided by operating activities was $3.4 million compared with $0.2 million of net cash used in operating activities in the prior quarter.
Free cash flow was $2.9 million for the fiscal second quarter compared with free cash outflow of $0.6 million in the previous quarter.
Guidance in Detail
The company anticipates fiscal third-quarter 2021 total revenues between $48.5 million and $49 million. The Zacks Consensus Estimate for revenues is pegged at $47.8 million.
For third-quarter fiscal 2021, subscription revenues are projected in the range of $35.5-$36 million.
Adjusted EBITDA is expected between $2 million and $2.5 million. Non-GAAP income from operations is expected in the range of $1.8-$2.3 million.
Non-GAAP earnings per share is anticipated in the range of 1-2 cents per share.
For fiscal 2021, Model N raised its guidance. The company now expects total revenues in the range of $189-$190 million compared with the previous guidance of $184-$186 million.
Non-GAAP earnings are expected to be 21-24 cents per share versus earlier guidance of 10-15 cents per share.
Fiscal 2021 subscription revenues are forecast in the range of $139-$140 million compared with the previous guidance of $136- $138 million.
Non-GAAP operating income is expected in the range of $13.7-$14.7 million compared with earlier projected range of $9.5 -$11.5 million. Adjusted EBITDA is now projected in the band of $14.5-15.5 million compared with previous guidance of $10-12 million.
Zacks Rank & Stocks to Consider
Currently, Model N carries a Zacks Rank #3 (Hold).
Some top-ranked stocks in the broader technology sector are
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