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Model N (MODN) Beats Q4 Earnings Estimates, Shares Gain

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Model N, Inc. (MODN - Free Report) reported strong fourth-quarter fiscal 2022 results, with both the bottom line and top line beating the respective Zacks Consensus Estimate driven by the successful transition to a SAAS platform as part of its transformation to a cloud company. With a healthy contribution from all of its growth levers, the company ended fiscal 2022 on a positive note and expects this momentum to continue in the impending quarters. The shares were up 8.1% post the earnings release to close at $39.11 as of Nov 9, 2022. 

Quarter Details

The company recorded a GAAP loss of $8.1 million or a loss of 22 cents per share compared with a loss of $6.1 million or a loss of 17 cents per share in the prior-year quarter. Despite top-line growth, the wider loss for the quarter was due to higher operating expenses. Non-GAAP earnings were 20 cents per share, which surpassed the Zacks Consensus Estimate by a penny.

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

In fiscal 2022, GAAP loss aggregated $28.6 million or a loss of 78 cents per share compared with a loss of $29.7 million or a loss of 84 cents per share in fiscal 2021. Non-GAAP earnings in fiscal 2022 were 72 cents per share compared with 54 cents per share in fiscal 2021.

Revenues improved to $58.2 million from $51.5 million and surpassed the consensus estimate of $56 million as the company successfully transitioned its customers onto its SaaS platform. Model N strengthened its foothold in the quarter by closing two SaaS transitions, signed multiple new logos and renewals and continued to witness strong contributions from subscription booking across its portfolio.

In fiscal 2022, revenues improved to $219.2 million from $193.4 million in fiscal 2021.

Operating Details

Subscription revenues (73.7% of total quarterly revenues) were $42.9 million, up 12.3% year over year, while Professional Services revenues (26.3%) increased 15% to $15.3 million.

Non-GAAP gross margin expanded 70 basis points (bps) from the year-ago quarter’s figure to 62.3%. While non-GAAP subscription gross margin was 70%, that for professional services was 41%. Adjusted EBITDA was $8.2 million, up 3.8% year over year. Non-GAAP operating income was $8 million, up 3%.

Cash Flow & Liquidity

In fiscal 2022, Model N generated $25.3 million from operating activities compared with $19.6 million a year ago. As of Sep 30, 2022, the company had $193.5 million in cash and cash equivalents with $135.4 million of long-term debt compared with the respective tallies of $165.5 million and $124.3 million in the year-ago period.


The company anticipates first-quarter fiscal 2023 total revenues between $57 million and $58 million. Subscription revenues are projected in the range of $42.5-$43 million. Adjusted EBITDA is expected to be between $8.5 million and $9.5 million. Non-GAAP operating income is expected in the range of $8.3-$9.3 million, while non-GAAP earnings per share are anticipated in the band of 21-23 cents per share.

For fiscal 2023, Model N expects total revenues in the band of $241-$244 million. Subscription revenues are estimated in the range of $178-$180 million. Adjusted EBITDA is projected within $37-$40 million. Non-GAAP operating income is expected in the range of $36-$39 million. Non-GAAP earnings are expected to be 90-97 cents per share.

Zacks Rank & Stocks to Consider

Model N currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader industry is Sierra Wireless, Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 229.9%, on average, in the trailing four quarters. Over the past year, the stock has gained 57.3%. Earnings estimates for the current year have moved up 1025% since November 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.

Aviat Networks, Inc. (AVNW - Free Report) carries a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has been revised 23.5% upward since November 2021.

Aviat Networks pulled off a trailing four-quarter earnings surprise of 9.7%, on average. It has soared 137.6% in the past two years.

Comtech Telecommunications Corp. (CMTL - Free Report) , sporting a Zacks Rank #1, is another key pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.    

Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. It holds leadership positions in the market for high-throughput modems used in cellular backhaul.

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