Model N (MODN) Q3 Earnings Beat Estimates on Higher Revenues
Model N, Inc. MODN delivered impressive third-quarter fiscal 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. The San Mateo, CA-based company recorded higher revenues year over year, driven by solid momentum in the Subscription business induced by rising demand for cloud-based solutions and growth in Professional Services. SaaS ARR (annual recurring revenue) increased 28% year over year.
Net Income
The company recorded a net income of $2.8 million or 7 cents per share against a loss of $6.2 million or a loss of 17 cents per share in the prior-year quarter. The significant improvement in earnings was primarily attributable to top-line growth.
Non-GAAP net income rose to $13.6 million or 35 cents per share from $8.5 million or 23 cents per share in the prior-year quarter. The bottom line comprehensively beat the Zacks Consensus Estimate of 24 cents.
Model N, Inc. Price, Consensus and EPS Surprise
Model N, Inc. price-consensus-eps-surprise-chart | Model N, Inc. Quote
Revenues
Quarterly revenues stood at $63.7 million, up from $56.2 million reported in the prior-year quarter. The 13.3% year-over-year improvement can be attributed to healthy net sales growth in all the business verticals. The top line beat the Zacks Consensus Estimate of $62 million.
Revenues from Subscriptions increased to $45.8 million, up from $40.6 million in the year-ago quarter. Increase in SaaS revenues, induced by the growing adoption of the company’s cloud solutions, supported net sales in this segment. However, this positive trend was partially reversed by declining maintenance revenues. SaaS net dollar retention increased to 126% from 123% in the prior-year quarter.
Professional Services revenues were $17.9 million, up from $15.6 million a year ago, owing to high utilization rates and strong demand for mission-critical, high-ROI solutions.
Other Details
Total operating expenses reported in the quarter were relatively flat at $33.5 million. Non-GAAP gross margin was 61.5%, almost in line with the prior-year quarter’s figure.
Adjusted EBITDA was $13.5 million, up from $10 million in the prior-year quarter. Non-GAAP operating income was $13.3 million, up from $9.8 million.
Cash Flow & Liquidity
In the first nine months of fiscal 2023, Model N generated $23.5 million from operating activities compared with $17.3 million of cash generation in the year-ago period. As of Jun 30, 2023, the company had $299.6 million in cash and cash equivalents with $279.9 million of long-term debt.
Outlook
For fourth-quarter fiscal 2023, the company expects total revenues between $61.6 million and $62.6 million. Subscription revenues are projected in the range of $45.6-$46.1 million. Adjusted EBITDA is expected to be between $11 million and $12 million. Non-GAAP operating income is expected within $10.8-$11.8 million, while non-GAAP earnings per share are estimated in the band of 28-31 cents.
For fiscal 2023, owing to solid quarterly performance, management raised total revenue expectations in the band of $247.1-$248.1 million, up from $244-$246 million projected earlier. Subscription revenues are estimated in the range of $180.5-$181 million. Adjusted EBITDA is projected within $42.9-$43.9 million, up from $39-$41 million expected earlier. Non-GAAP operating income is expected within $41.8-$42.8 million, up from $37-$39 million, while non-GAAP earnings are expected to be $1.08-$1.10 per share, up from prior projections of 94-99 cents.
Model N currently sports a Zacks Rank #1 (Strong Buy).
Other Key Picks
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T-Mobile US, Inc. TMUS, carrying a Zacks Rank #2, delivered an earnings surprise of 8.8% in the last reported quarter. It has a VGM Score of B.
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