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Why Is Model N (MODN) Down 6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Model N (MODN - Free Report) . Shares have lost about 6% in that time frame, outperforming 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 catalysts.
Model N Beats Earnings & Revenue Estimates in Q1
Model N reported first-quarter fiscal 2022 non-GAAP earnings of 15 cents per share, which surpassed the Zacks Consensus Estimate by 87.5% but decreased 6.3% year over year.
Revenues were $51.5 million, which beat the Zacks Consensus Estimate by 4% and increased 20.6% year over year.
Model N strengthened its foothold in the Life Sciences vertical and secured additional commitments for Software-as-a-Service (SaaS) transitions. Business Services, which was acquired from Deloitte, contributed $5.8 million to total revenues in the quarter.
The company inked new logos, closed four SaaS transitions, expanded within existing customers and witnessed solid renewals.
Quarter Details & Business Highlights
Model N reports under two business lines — Subscription and Professional Services.
Subscription revenues (73.9% of total revenues) were $38.1 million, up 21.2% year over year.
Professional Services revenues (26.1%) increased 19.1% to $13.5 million.
During the quarter, Model N inked a deal with a Japan-based pharmaceutical and biotechnology company. It expanded relationships with Akorn Pharmaceuticals. Four Model N customers committed to SaaS transitions, including Abbott Diagnostics Division, AstraZeneca plc, ConMed Corporation and Stryker Orthopaedics.
In the High Tech vertical, Model N witnessed growth with the addition of Solidigm Technology, a global provider of NAND flash technology that was recently spun out of Intel. It also expanded relationships with Advanced Micro Devices, Diodes Incorporated, Marvell Technology and Western Digital.
Operating Details
Non-GAAP gross margin contracted 310 basis points (bps) from the year-ago quarter’s figure to 60.3%.
Non-GAAP subscription gross margin declined 640 bps from the prior-year quarter’s levels to 67.6%. Non-GAAP professional services gross margin expanded 580 bps to 39.7%.
Adjusted EBITDA was $7.2 million, down 3.7% year over year. Non-GAAP operating income was $7 million, down 4.9%.
Cash Flow & Liquidity
During the quarter, Model N used $9.7 million of net cash from operating activities. As of Dec 31, 2021, the company had cash and cash equivalents of $155.5 million and $127 million of long-term debt.
Guidance
The company anticipates second-quarter fiscal 2022 total revenues between $51 million and $51.5 million. Subscription revenues are projected in the range of $37-$37.5 million. Adjusted EBITDA is expected between $4 million and $4.5 million. Non-GAAP income from operations is expected in the range of $3.8-$4.3 million. Non-GAAP earnings per share are anticipated in the range of 6-8 cents per share.
For fiscal 2022, Model N expects total revenues in the band of $212-$214.5 million. Subscription revenues are estimated in the range of $153-$155.5 million. Adjusted EBITDA is projected within $24-$26 million. Non-GAAP operating income is expected in the range of $23-$25 million. Non-GAAP earnings are expected to be 46-52 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Model N has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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.
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 #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Model N (MODN) Down 6% Since Last Earnings Report?
A month has gone by since the last earnings report for Model N (MODN - Free Report) . Shares have lost about 6% in that time frame, outperforming 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 catalysts.
Model N Beats Earnings & Revenue Estimates in Q1
Model N reported first-quarter fiscal 2022 non-GAAP earnings of 15 cents per share, which surpassed the Zacks Consensus Estimate by 87.5% but decreased 6.3% year over year.
Revenues were $51.5 million, which beat the Zacks Consensus Estimate by 4% and increased 20.6% year over year.
Model N strengthened its foothold in the Life Sciences vertical and secured additional commitments for Software-as-a-Service (SaaS) transitions. Business Services, which was acquired from Deloitte, contributed $5.8 million to total revenues in the quarter.
The company inked new logos, closed four SaaS transitions, expanded within existing customers and witnessed solid renewals.
Quarter Details & Business Highlights
Model N reports under two business lines — Subscription and Professional Services.
Subscription revenues (73.9% of total revenues) were $38.1 million, up 21.2% year over year.
Professional Services revenues (26.1%) increased 19.1% to $13.5 million.
During the quarter, Model N inked a deal with a Japan-based pharmaceutical and biotechnology company. It expanded relationships with Akorn Pharmaceuticals. Four Model N customers committed to SaaS transitions, including Abbott Diagnostics Division, AstraZeneca plc, ConMed Corporation and Stryker Orthopaedics.
In the High Tech vertical, Model N witnessed growth with the addition of Solidigm Technology, a global provider of NAND flash technology that was recently spun out of Intel. It also expanded relationships with Advanced Micro Devices, Diodes Incorporated, Marvell Technology and Western Digital.
Operating Details
Non-GAAP gross margin contracted 310 basis points (bps) from the year-ago quarter’s figure to 60.3%.
Non-GAAP subscription gross margin declined 640 bps from the prior-year quarter’s levels to 67.6%. Non-GAAP professional services gross margin expanded 580 bps to 39.7%.
Adjusted EBITDA was $7.2 million, down 3.7% year over year. Non-GAAP operating income was $7 million, down 4.9%.
Cash Flow & Liquidity
During the quarter, Model N used $9.7 million of net cash from operating activities. As of Dec 31, 2021, the company had cash and cash equivalents of $155.5 million and $127 million of long-term debt.
Guidance
The company anticipates second-quarter fiscal 2022 total revenues between $51 million and $51.5 million. Subscription revenues are projected in the range of $37-$37.5 million. Adjusted EBITDA is expected between $4 million and $4.5 million. Non-GAAP income from operations is expected in the range of $3.8-$4.3 million. Non-GAAP earnings per share are anticipated in the range of 6-8 cents per share.
For fiscal 2022, Model N expects total revenues in the band of $212-$214.5 million. Subscription revenues are estimated in the range of $153-$155.5 million. Adjusted EBITDA is projected within $24-$26 million. Non-GAAP operating income is expected in the range of $23-$25 million. Non-GAAP earnings are expected to be 46-52 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Model N has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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.
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 #2 (Buy). We expect an above average return from the stock in the next few months.