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Why Is Model N (MODN) Up 4.7% 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 added about 4.7% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Model N (MODN - Free Report) Tops Q2 Earnings Estimates on Revenue Growth

Model N, Inc. reported second-quarter fiscal 2022 results with year-over-year increase in revenues and non-GAAP earnings driven by healthy demand trends and record bookings. The company aims to continue this growth momentum in the future with the gradual transition to the cloud.

Quarter Details

GAAP loss for the reported quarter were $8 million or a loss of 22 cents per share compared with a net loss of $10.7 million or a loss of 30 cents per share in the year-ago quarter. Non-GAAP earnings of 14 cents per share surpassed the Zacks Consensus Estimate of 7 cents and increased 250% year over year.

Revenues were $53.5 million, which beat the Zacks Consensus Estimate by 4% and increased 11% year over year.

During the quarter, Model N inked two additional Software-as-a-Service (SaaS) transactions and had success selling new products. The company also launched Model N Ngage, an application to aid its customers with better experience and drive continuous process improvements.

Subscription revenues (71.8% of total revenues) were $38.2 million, up 6.4% year over year.

Professional Services revenues (28.2% of total revenues) were $15 million, up 22.7% year over year.

Operating Details

Non-GAAP gross margin increased 300 basis points (bps) from the year-ago quarter’s figure to 60%. Non-GAAP subscription gross margin moved up 70 bps from the prior-year quarter’s levels to 66.8%. Non-GAAP professional services gross margin expanded 1,280 bps to 42%.

Adjusted EBITDA was $6.6 million, which was up 104.8% year over year. Non-GAAP operating income more than doubled to $6.4 million.

Cash Flow & Liquidity

For the six months of fiscal 2022, Model N reported net cash from operating activities at $2.9 million compared with 3.1 million. As of Mar 31, 2022, the company had cash and cash equivalents of $170.4 million and $129.8 million of long-term debt.

Guidance

The company anticipates third-quarter fiscal 2022 total revenues between $54.5 million and $55 million. Subscription revenues are projected in the range of $39.2-$39.7 million. Adjusted EBITDA is expected between $7 million and $7.5 million. Non-GAAP income from operations is expected in the range of $6.7-$7.2 million. Non-GAAP earnings per share are anticipated in the range of 14-16 cents per share.

For fiscal 2022, Model N expects total revenues in the band of $215.5 - $216.5 million. Subscription revenues are estimated in the range of $156-$157 million. Adjusted EBITDA is projected within $27.5-$28.5 million. Non-GAAP operating income is expected in the range of $26.5-$27.5 million. Non-GAAP earnings are expected to be 56-59 cents per share.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted -7.14% due to these changes.

VGM Scores

At this time, Model N has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Model N has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Model N belongs to the Zacks Internet - Software industry. Another stock from the same industry, Paylocity (PCTY - Free Report) , has gained 14.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Paylocity reported revenues of $245.97 million in the last reported quarter, representing a year-over-year change of +32.2%. EPS of $1.22 for the same period compares with $0.88 a year ago.

Paylocity is expected to post earnings of $0.52 per share for the current quarter, representing a year-over-year change of +13%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Paylocity has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.


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