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Model N (MODN) Down 8.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Model N (MODN - Free Report) . Shares have lost about 8.4% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Model N Beats Q1 Earnings Estimates on Higher Revenues

Model N reported strong first-quarter fiscal 2023 results, with both the bottom and top lines 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 expects this momentum to continue in the impending quarters. 

Quarter Details

The company recorded a GAAP loss of $4.1 million or a loss of 11 cents per share compared with a loss of $6.3 million or a loss of 17 cents per share in the prior-year quarter. The narrower loss in the quarter, despite higher operating expenses, was primarily attributable to top-line growth. Non-GAAP earnings were 23 cents per share, which surpassed the Zacks Consensus Estimate by a penny.

Revenues improved to $59.2 million from $51.5 million and surpassed the consensus estimate of $58 million as the company successfully transitioned its customers onto its SaaS platform. Model N strengthened its foothold in the quarter by closing a significant SaaS transition, signed multiple new logos and renewals and continued to witness solid contributions from subscription booking across its portfolio.

Operating Details

Subscription revenues (74.7% of total quarterly revenues) were $44.2 million, up 16% year over year, while Professional Services revenues (25.3%) increased 10.4% to $14.9 million.

Non-GAAP gross margin expanded 70 basis points (bps) from the year-ago quarter’s figure to 61%. While the non-GAAP subscription gross margin was 69.3%, that for professional services was 36.2%. Adjusted EBITDA was $9.1 million, up 26.4% year over year. Non-GAAP operating income was $8.9 million, up 27.1%.

Cash Flow & Liquidity

In the first three months of fiscal 2023, Model N utilized $18.3 million for operating activities compared with $9.7 million of cash utilization a year ago. As of Dec 31, 2022, the company had $175.2 million in cash and cash equivalents with $169.4 million of long-term debt.


The company anticipates total revenues for second-quarter fiscal 2023 between $59 million and $60 million. Subscription revenues are projected in the range of $43.5-$44 million. Adjusted EBITDA is expected to be between $6 million and $7 million. Non-GAAP operating income is expected within $5.8-$6.8 million, while non-GAAP earnings per share are anticipated in the band of 15-18 cents per share.

For fiscal 2023, Model N raised total revenue expectations in the band of $242-$245 million, up from $241-$244 million projected earlier. Subscription revenues are estimated in the range of $179-$181 million, up from prior expectations of $178-$180 million. Adjusted EBITDA is projected within $37-$40 million. Non-GAAP operating income is expected within $36-$39 million. Non-GAAP earnings are expected to be 90-97 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -1400% due to these changes.

VGM Scores

At this time, Model N has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.


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 #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, Atlassian (TEAM - Free Report) , has gained 1.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.

Atlassian reported revenues of $872.7 million in the last reported quarter, representing a year-over-year change of +26.8%. EPS of $0.45 for the same period compares with $0.50 a year ago.

For the current quarter, Atlassian is expected to post earnings of $0.36 per share, indicating a change of -23.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +4.7% over the last 30 days.

Atlassian has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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