Model N Inc. (MODN) Tops Q2 EPS by 5c; Offers 3Q & FY20 EPS/Revenue Guidance

Model N Inc. (NYSE: MODN) reported Q2 EPS of $0.07, $0.05 better than the analyst estimate of $0.02. Revenue for the quarter came in at $39.95 million versus the consensus estimate of $39.04 million.

“Our second quarter results exceeded our revenue and profitability guidance. Our financial metrics demonstrate that the strategic focus we brought to the company over the last two years is delivering meaningful improvements in growth and profitability. This strong financial position combined with our go-to-market execution, commitment to customer success, and mission-critical products position us to weather this challenging environment and to grow over time,” said Jason Blessing, president and chief executive officer of Model N. “As the COVID-19 pandemic spread over the last several weeks, we quickly made adjustments to our global operations to allow our team to work remotely across sales, services and product development. Our team is doing well and remains committed to supporting our customers, many of which are playing important roles on the front lines of the pandemic.”

Recent Highlights

• Model N Is Actively Responding to Customer Needs During the COVID-19 Pandemic – Model N’s employees efficiently transitioned to remote work, utilizing tools and processes created for a global workforce. This approach has allowed our teams to deliver projects remotely and to provide uninterrupted support. We also are in a unique position to provide creative solutions for our customers because of our heritage serving biopharmaceutical and semiconductor companies and our industry specific cloud services. We are doing everything possible to support our customers during this demanding time.
• Several Leading Life Sciences Companies Transitioning to Model N’s Revenue Cloud – The U.S. branch of a large, Asia-based multinational pharmaceutical company and the specialty brands division of a leading global biopharmaceutical company both agreed to transition to Model N’s Revenue Cloud. Also, a top 30 pharmaceutical company selected Model N’s Revenue Cloud in an effort to stay current with ever-changing business requirements. Each of these customers has reported that they have realized improved regulatory compliance, increased operational efficiency, and the flexibility provided by Model N cloud services.
• Customer Success and Go-Lives Continue at a Healthy Pace – Customers across our vertical markets went live on Model N’s Revenue Cloud, on time and on budget. The generics division of multibillion-dollar Mallinckrodt Pharmaceuticals became the first generics customer to transition to Model N’s Revenue Cloud and one of our fastest implementations. Mallinckrodt joins Gilead, Biogen, and Novo Nordisk as customers that have transitioned to Model N’s Revenue Cloud. In high tech, AVX Corporation, an international manufacturer of advanced electronic components, completed a global roll out.
• 2020 State of Revenue Report Reveals Companies Increasingly Struggle to Achieve Effective Revenue Management – A recent survey of over 300 senior executives found that tools and processes for discounting, quoting and monitoring revenue performance led to lost revenue at companies of all sizes as revenue management became increasingly complex. Over 90% believe their organizations would benefit from cloud-based solutions that would give them real-time visibility into revenue performance, channel sales and inventory, and eliminate inefficiencies in their revenue management systems.

Second Quarter 2020 Financial Highlights

• Revenues: Total revenues were $40.0 million, an increase of 15% from the second quarter of fiscal year 2019. Subscription revenues were $29.0 million, an increase of 12% from the second quarter of fiscal year 2019.
• Gross Profit: Gross profit was $23.5 million, an increase of 30% from the second quarter of fiscal year 2019. Gross margin was 59% compared to 52% for the second quarter of fiscal year 2019. Non-GAAP gross profit was $24.8 million, an increase of 27% from the second quarter of fiscal year 2019. Non-GAAP gross margin was 62% compared to 56% for the second quarter of fiscal year 2019. Subscription gross margin was 70% compared to 66% for the second quarter of fiscal year 2019. Non-GAAP subscription gross margin was 72% compared to 70% for the second quarter of fiscal year 2019.
• GAAP Loss and Non-GAAP Income from Operations: GAAP loss from operations was $(4.1) million, an improvement of 13% from the second quarter of fiscal year 2019. Non-GAAP income from operations was $3.0 million, an increase of 102% from the second quarter of fiscal year 2019.
• GAAP Net Loss: GAAP net loss was $(4.6) million, an improvement of 22% from the second quarter of fiscal year 2019. GAAP basic and diluted net loss per share attributable to common stockholders was $(0.14) based upon weighted average shares outstanding of 33.8 million compared to net loss per share of $(0.18) for the second quarter of fiscal year 2019 based upon weighted average shares outstanding of 32.0 million.
• Non-GAAP Net Income: Non-GAAP net income was $2.6 million compared to a non-GAAP net income of $0.4 million for the second quarter of fiscal year 2019. Non-GAAP net income per diluted share was $0.07 based upon diluted weighted average shares outstanding of 35.1 million compared to non-GAAP net income per diluted share of $0.01 for the second quarter of fiscal year 2019 based upon diluted weighted average shares outstanding of 33.0 million.
• Adjusted EBITDA: Adjusted EBITDA was $3.2 million, an increase of 76% from the second quarter of fiscal year 2019.
• Cash and Cash Flows: Cash and cash equivalents as of March 31, 2020 totaled $61.3 million. During the quarter, we paid down $5.0 million in debt. Net cash provided by operating activities was $3.4 million for the first six months of fiscal year 2020, compared with net cash provided by operating activities of $0.5 million in the prior fiscal year period. Free cash flow was $3.3 million for the first six months of fiscal year 2020, compared with free cash flow of $0.3 million in the prior fiscal year period.

GUIDANCE:

Model N Inc. sees Q3 2020 EPS of $0.05-$0.07, versus the consensus of $0.06. Model N Inc. sees Q3 2020 revenue of $39.4-39.8 million, versus the consensus of $38.51 million.

Model N Inc. sees FY2020 EPS of $0.28-$0.31, versus the consensus of $0.29. Model N Inc. sees FY2020 revenue of $154-156 million, versus the consensus of $155.47 million.

For earnings history and earnings-related data on Model N Inc. (MODN) click here.

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