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Model N (MODN) Q1 Earnings and Revenues Surpass Estimates

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Model N, Inc. (MODN - Free Report) reported first-quarter fiscal 2018 earnings of 3 cents per share in contrast to the year-ago quarter loss of 15 cents per share. The Zacks Consensus Estimate was pegged at a loss of 6 cents per share.

Revenues of $39.1 million increased 39% year over year and beat the Zacks Consensus Estimate of $37 million. The figure also surpassed the guided range of $37 million to $37.5 million.

Management noted that successful integration of Revitas was a major driving force and helped the company deliver greater value to its investors. The company has also made steady progress in its transformation to a 100% Software-as-a-Service (SaaS) based model.

Model N stock has rallied 37.5% in the last year, substantially outperforming the 21.8% gain of the industry it belongs to.

Quarter in Detail

Model N has two reportable segments namely License & Implementation and SaaS & Maintenance.

SaaS & Maintenance revenues of $32.3 million grew 43% year over year. Model N is accelerating its transition of revenue management to cloud and is on track to shift its business to a 100% SaaS and Maintenance revenue model.

License & Implementation revenues of $6.7 million increased 24% on a year-over-year basis. The company no longer sells on-premise perpetual licenses. Management expects this revenue line to continue to decline through fiscal 2018 due to backlog burn off and transition of customers to cloud.

To further aid growth, the company unveiled the Revenue Cloud platform during the quarter, which will enable companies in manufacturing industries, technology and life science industries to carry out digital transformation.

Management is optimistic about the company’s Revenue Cloud offering for med-tech, pharma and high tech companies.

During the quarter, the company inked several deals with high tech and life science companies including the likes of DexCom, Seagate, Intel and Amgen to name a few.

Non-GAAP gross profit increased to $23.9 million from $15.0 million recorded in the year-ago quarter. Non-GAAP margin was 60%, up from 53% reported in the year-ago-quarter.

Adjusted EBITDA was $2.9 million compared with ($3.5) million in the year-ago quarter. Non-GAAP income from operations was $2 million against year-ago loss of $4.2 million. The improved results reflect strong synergies from the Revitas acquisition.

Model N, Inc. Price, Consensus and EPS Surprise

Model N, Inc. Price, Consensus and EPS Surprise | Model N, Inc. Quote

Balance Sheet

Model N exited the quarter with cash and cash equivalent balance of $48.3 million, down from $57.6 million at the end of first-quarter fiscal 2017.

Cash used for operations was $9.7 million. This includes payment of corporate bonuses, interest payments on notes associated with acquisition of Revitas and sales commission for the last quarter.

Guidance

Model N expects fiscal second-quarter 2018 GAAP revenues to be in the range of $38 million to $38.5 million. The Zacks Consensus Estimate is pegged at $36.67 million.

Non-GAAP net loss is likely to be between 3 cents and 5 cents per share for the second quarter. The Zacks Consensus Estimate is pegged at a loss of 6 cents.

Interest payments are expected to be approximately $5 million from Revitas acquisition and another $5 million from debt.

For fiscal 2018, GAAP revenues, after deferred revenue adjustment, are expected to be in the range of $149-$151 million. SaaS and maintenance revenues are anticipated to grow 15% organically driven by cloud subscription and professional services growth.

Non-GAAP loss per share is expected to be in the range of 3 cents to 10 cents.

Free cash flow is expected to increase approximately $10 million in fiscal 2018 from2017.

Zacks and Stocks to Consider

Model N carries a Zacks Rank #3 (Hold)

Some better-ranked stocks in the Internet Software Services industry are Facebook, Inc. (FB - Free Report) , and Twitter, Inc. (TWTR - Free Report) , carrying a Zacks Rank #2 (Buy) and The Trade Desk Inc. (TTD - Free Report) , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook, Twitter and The Trade Desk have a long-term expected earnings growth rate of 26.28%, 21.50% and 25%, respectively.

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