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Model N (MODN) Q1 Earnings and Revenues Surpass Estimates

Zacks Equity Research

Model N, Inc. MODN reported first-quarter fiscal 2020 non-GAAP earnings of 12 cents per share, which surpassed the Zacks Consensus Estimate by 100% and increased 300% year over year.

Revenues came in at $38.4 million, which beat the consensus mark by 3.2% and increased 9% year over year. The figure was also higher than the guided range of $37 million to $37.4 million.

Robust adoption of the company’s revenue cloud platform drove the top line. Notably, life sciences companies like Biogen and Novo Nordisk as well as a leading pharmaceutical company completed their transition to Model N’s revenue cloud platform during the quarter.

Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model.
 

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

Quarter in Detail

Model N has started reporting earnings under two business lines — Subscription and Professional Services — from first-quarter fiscal 2019.

In first-quarter fiscal 2020, Subscription revenues were $28.2 million, up 12% year over year. This was driven by strong sales execution, which added new subscription revenues of $17.5 million, partially offset by a decline in maintenance subscription contracts.

Professional Services revenues increased 3.4% on a year-over-year basis to $10.2 million.

Operating Details

Non-GAAP gross profit for the first fiscal quarter was $23.5 million.

Non-GAAP gross margin expanded 400 basis points (bps) from the year-ago-figure to 61%. Non-GAAP subscription gross margin during the reported quarter came in at 72% and non-GAAP gross margin for professional services was 31%.

Adjusted EBITDA during the quarter came in at $4.8 million compared with $2.9 million reported in the year-ago quarter.

Non-GAAP operating income was $4.6 million. Moreover, non-GAAP operating margin expanded 500 bps to 12%.

Balance Sheet & Cash Flow

As of Dec 31, Model N had cash and cash equivalents of $55.8 million compared with $60.8 million reported in the previous quarter.

As of Dec 31, the company had total debt (including current portion) of $44.4 million, compared with $44.3 million reported in the previous quarter.

For the three months ended Dec 31, net cash outflow from operating activities was $4.9 million and free cash outflow was $5 million.

Guidance

The company anticipates fiscal second-quarter 2020 GAAP revenues to come in between $38.8 million and $39.2 million. Second-quarter subscriptions are anticipated in the range of $28.4-$28.8 million.

The Zacks Consensus Estimate for revenues is pegged at $37.8 million, indicating growth of 8.5% from the figure reported in the year-ago quarter.

Non-GAAP net income is anticipated in the range of 1 cent to 3 cents per share for the second quarter. The Zacks Consensus Estimate for earnings is pegged at 5 cents per share compared with 1 cent reported in the year-ago quarter.

Adjusted EBITDA is anticipated in the range of $1.8 million to $2.2 million.

For fiscal 2020, Model N expects GAAP revenues to be in the range of $154 million to $156 million. The Zacks Consensus Estimate for revenues is pegged at $153.4 million, up 8.6% year over year.

Fiscal 2020 subscription is projected in the range of $113-$115 million.

Non-GAAP earnings are expected in the range of 25-31 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 28 cents per share, up 27.3% year over year.

Adjusted EBITDA is projected in the range of $13 million to $15 million.

Zacks Rank & Stocks to Consider

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

Silicon Motion Technology Corporation SIMO, Perion Network Ltd. PERI and CEVA Inc. CEVA and are some better-ranked stocks in the broader computer and technology sector. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Silicon Motion Technology, Perion and CEVA are set to report quarterly results on Feb 6, 12 and 18, respectively.

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