Le Lézard
Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast, Advisory

Model N Announces Third Quarter Fiscal Year 2020 Financial Results


Model N, Inc. (NYSE: MODN), the leading provider of cloud revenue management solutions for Life Sciences and High Tech companies, today announced financial results for the third quarter fiscal year 2020 ended June 30, 2020.

"Our third quarter results exceeded our revenue and profitability guidance. I am pleased with our team's performance during this unprecedented time," said Jason Blessing, president and chief executive officer of Model N. "We had an impressive number of go-lives in the quarter and strong engagement with our customer base. This demonstrates the importance of our cloud products during this critical time when our customers are responding to the COVID-19 pandemic. We continue to collaborate closely with our customers, delivering on existing projects and commencing new initiatives."

Recent Highlights

Third Quarter 2020 Financial Highlights

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial tables included in this press release.

Guidance

The impact of COVID-19 and its effect on Model N's business is included in the guidance that is being provided for the fourth quarter of fiscal year 2020 and the full fiscal year ending September 30, 2020 and reflects the company's outlook as of August 4, 2020.

(in $ millions, except per share)

Fourth Quarter Fiscal 2020

Full Year Fiscal 2020

Total revenues

40.1 - 40.5

159.7 - 160.1

Subscription revenues

29.0 - 29.4

115.5 - 115.9

Non-GAAP income from operations

4.5 - 4.9

18.3 - 18.7

Non-GAAP net income per share

0.07 - 0.09

0.41 - 0.43

Adjusted EBITDA

4.6 - 5.0

19.0 - 19.4

Quarterly Results Conference Call

Model N will host a conference call today at 2:00 PM Pacific Time (5:00 PM Eastern Time) to review the company's financial results for the third quarter fiscal year 2020 ended June 30, 2020. The conference call can be accessed by dialing 877-407-4018 from the United States or +1-201-689-8471 internationally with reference to the company name and conference title, and a live webcast and replay of the conference call can be accessed from the investor relations page of Model N's website at investor.modeln.com. Following the completion of the call through 11:59 p.m. ET on August 18, 2020, a telephone replay will be available by dialing 844-512-2921 from the United States or +1-412-317-6671, internationally, with recording access code 13706213.

About Model N

Model N is the leading provider of cloud revenue management solutions for Life Sciences and High Tech companies. Our software helps companies drive mission-critical business processes such as pricing, quoting, contracting, regulatory compliance, rebates and incentives. With deep industry expertise, Model N supports the complex business needs of the world's leading brands in pharmaceutical, medical technology, semiconductor, and High Tech manufacturing across more than 120 countries, including Johnson & Johnson, AstraZeneca, Novartis, Microchip Technology and ON Semiconductor. For more information, visit www.modeln.com.

Model N® is the registered trademark of Model N, Inc. Any other company names mentioned are the property of their respective owners and are mentioned for identification purposes only.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding Model N's fourth quarter and full year fiscal 2020 financial results, the impact COVID-19 will have on our business, Model N's profitability, future planned enhancements to our products and benefits from our products. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) delays in closing customer contracts; (ii) our ability to improve and sustain our sales execution; (iii) the timing of new orders and the associated revenue recognition; (iv) adverse changes in general economic or market conditions; (v) delays or reductions in information technology spending and resulting variability in customer orders from quarter to quarter; (vi) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by our competitors; (vii) our ability to manage our growth effectively; and (viii) acceptance of our applications and services by customers; (ix) success of new products; (x) the risk that the strategic initiatives that we may pursue will not result in significant future revenues; (xi) changes in health care regulation and policy and tax in the United States and worldwide; (xii) our ability to retain customers and (xiii) adverse impacts on our business and financial condition due to COVID-19. Further information on risks that could affect Model N's results is included in our filings with the Securities and Exchange Commission ("SEC"), including our most recent quarterly report on Form 10-Q and our annual report on Form 10-K for the fiscal year ended September 30, 2019, and any current reports on Form 8-K that we may file from time to time. Should any of these risks or uncertainties materialize, actual results could differ materially from expectations. Model N assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

Non-GAAP Financial Measures

We have provided in this release financial information that has not been prepared in accordance with accounting standards generally accepted in the United States of America ("GAAP"). We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures below. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Our reported results include certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP subscription gross profit, non-GAAP subscription gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share, and adjusted EBITDA. Non-GAAP gross profit excludes stock-based compensation expenses, amortization of intangible assets, and deferred revenue adjustments as they are often excluded by other companies to help investors understand the operational performance of their business. Non-GAAP income (loss) from operations excludes stock-based compensation expense, amortization of intangible assets, and deferred revenue adjustments. Non-GAAP net income (loss) excludes stock-based compensation expense, amortization of intangible assets, amortization of debt discount and issuance costs related to our convertible senior notes, and deferred revenue adjustments. Additionally, stock-based compensation expense varies from period to period and from company to company due to such things as valuation methodologies and changes in stock price. Adjusted EBITDA is defined as net loss, adjusted for depreciation and amortization, stock-based compensation expense, acquisition & integration related expenses, deferred revenue adjustment, interest (income) expense, net, other (income) expenses, net, and provision for (benefit from) income taxes. Reconciliation tables are provided in this press release.

We have not reconciled guidance for non-GAAP financial measures to their most directly comparable GAAP measures because certain items that impact these measures are uncertain, out of our control and/or cannot be reasonably predicted or estimated, such as the difficulties of estimating certain items such as charges to stock-based compensation expense. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.

Model N, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

As of
June 30, 2020

 

As of
September 30, 2019

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

192,372

 

 

$

60,780

 

Accounts receivable, net

29,255

 

 

26,953

 

Prepaid expenses

2,379

 

 

2,776

 

Other current assets

8,228

 

 

4,039

 

Total current assets

232,234

 

 

94,548

 

Property and equipment, net

641

 

 

1,043

 

Operating lease right-of-use assets

4,035

 

 

?

 

Goodwill

39,283

 

 

39,283

 

Intangible assets, net

25,551

 

 

29,131

 

Other assets

5,438

 

 

5,588

 

Total assets

$

307,182

 

 

$

169,593

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

3,541

 

 

$

2,302

 

Accrued employee compensation

14,870

 

 

19,906

 

Accrued liabilities

4,425

 

 

4,354

 

Operating lease liabilities, current portion

2,036

 

 

?

 

Deferred revenue, current portion

45,249

 

 

44,875

 

Long term debt, current portion

?

 

 

4,911

 

Total current liabilities

70,121

 

 

76,348

 

Long-term liabilities

 

 

 

Long term debt

112,163

 

 

39,371

 

Operating lease liabilities, less current portion

2,295

 

 

?

 

Other long-term liabilities

1,709

 

 

1,152

 

Total long-term liabilities

116,167

 

 

40,523

 

Total liabilities

186,288

 

 

116,871

 

Stockholders' equity

 

 

 

Common stock

5

 

 

5

 

Preferred stock

?

 

 

?

 

Additional paid-in capital

344,932

 

 

266,295

 

Accumulated other comprehensive loss

(1,627

)

 

(1,169

)

Accumulated deficit

(222,416

)

 

(212,409

)

Total stockholders' equity

120,894

 

 

52,722

 

Total liabilities and stockholders' equity

$

307,182

 

 

$

169,593

 

 

 

 

 

Model N, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Subscription

$

29,339

 

 

$

26,638

 

 

$

86,512

 

 

$

77,780

 

Professional services

11,917

 

 

8,074

 

 

33,084

 

 

26,852

 

Total revenues

41,256

 

 

34,712

 

 

119,596

 

 

104,632

 

Cost of revenues

 

 

 

 

 

 

 

Subscription

8,374

 

 

8,658

 

 

25,882

 

 

26,248

 

Professional services

7,699

 

 

7,206

 

 

23,026

 

 

22,929

 

Total cost of revenues

16,073

 

 

15,864

 

 

48,908

 

 

49,177

 

Gross profit

25,183

 

 

18,848

 

 

70,688

 

 

55,455

 

Operating expenses

 

 

 

 

 

 

 

Research and development

8,288

 

 

7,060

 

 

25,906

 

 

21,887

 

Sales and marketing

9,716

 

 

7,164

 

 

29,682

 

 

23,814

 

General and administrative

7,559

 

 

6,713

 

 

22,069

 

 

19,702

 

Total operating expenses

25,563

 

 

20,937

 

 

77,657

 

 

65,403

 

Loss from operations

(380

)

 

(2,089

)

 

(6,969

)

 

(9,948

)

Interest expense, net

1,986

 

 

689

 

 

2,951

 

 

2,313

 

Other expenses (income), net

(168

)

 

(4

)

 

(423

)

 

408

 

Loss before income taxes

(2,198

)

 

(2,774

)

 

(9,497

)

 

(12,669

)

Provision for income taxes

182

 

 

230

 

 

510

 

 

969

 

Net loss

$

(2,380

)

 

$

(3,004

)

 

$

(10,007

)

 

$

(13,638

)

Net loss per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.07

)

 

$

(0.09

)

 

$

(0.30

)

 

$

(0.43

)

Weighted average number of shares used in computing net loss per share:

 

 

 

 

 

 

 

Basic and diluted

34,411

 

 

32,596

 

 

33,781

 

 

32,028

 

 

 

 

 

 

 

 

 

Model N, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Nine Months Ended June 30,

 

2020

 

2019

Cash Flows from Operating Activities

 

 

 

Net loss

$

(10,007

)

 

$

(13,638

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

4,163

 

 

5,191

 

Stock-based compensation

17,232

 

 

12,822

 

Amortization of debt discount and issuance costs

1,118

 

 

401

 

Deferred income taxes

33

 

 

(170

)

Amortization of capitalized contract acquisition costs

1,858

 

 

1,238

 

Loss on early extinguishment of debt

319

 

 

?

 

Other non-cash charges

(8

)

 

(108

)

Changes in assets and liabilities

 

 

 

Accounts receivable

(2,292

)

 

2,295

 

Prepaid expenses and other assets

(3,621

)

 

(1,368

)

Accounts payable

781

 

 

1,088

 

Accrued employee compensation

(1,165

)

 

(653

)

Other current and long-term liabilities

(2,322

)

 

443

 

Deferred revenue

1,133

 

 

(2,740

)

Net cash provided by operating activities

7,222

 

 

4,801

 

Cash Flows from Investing Activities

 

 

 

Purchases of property and equipment

(190

)

 

(227

)

Net cash used in investing activities

(190

)

 

(227

)

Cash Flows from Financing Activities

 

 

 

Proceeds from exercise of stock options and issuance of employee stock purchase plan

2,442

 

 

2,198

 

Proceeds from issuance of convertible senior notes, net of issuance costs

166,894

 

 

?

 

Principal payments on debt

(44,750

)

 

(5,000

)

Net cash provided by (used in) financing activities

124,586

 

 

(2,802

)

Effect of exchange rate changes on cash and cash equivalents

(26

)

 

53

 

Net increase in cash and cash equivalents

131,592

 

 

1,825

 

Cash and cash equivalents

 

 

 

Beginning of period

60,780

 

 

56,704

 

End of period

$

192,372

 

 

$

58,529

 

 

 

 

 

Model N, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results

(in thousands, except per share amounts)

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Reconciliation from GAAP net loss to adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(2,380

)

 

$

(3,004

)

 

$

(10,007

)

 

$

(13,638

)

Reversal of non-GAAP items

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

5,400

 

 

3,723

 

 

17,232

 

 

12,822

 

Depreciation and amortization

 

1,350

 

 

1,658

 

 

4,163

 

 

5,191

 

Interest expense, net

 

1,986

 

 

689

 

 

2,951

 

 

2,313

 

Other expenses (income), net

 

(168

)

 

(4

)

 

(423

)

 

408

 

Provision for income taxes

 

182

 

 

230

 

 

510

 

 

969

 

Adjusted EBITDA

 

$

6,370

 

 

$

3,292

 

 

$

14,426

 

 

$

8,065

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Reconciliation from GAAP gross profit to non-GAAP gross profit

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

25,183

 

 

$

18,848

 

 

$

70,688

 

 

$

55,455

 

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

940

 

 

938

 

 

3,114

 

 

2,907

 

Amortization of intangible assets (b)

 

282

 

 

476

 

 

911

 

 

1,428

 

Non-GAAP gross profit

 

$

26,405

 

 

$

20,262

 

 

$

74,713

 

 

$

59,790

 

Percentage of revenue

 

64.0

%

 

58.4

%

 

62.5

%

 

57.1

%

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Reconciliation from GAAP subscription gross profit to non-GAAP subscription gross profit

 

 

 

 

 

 

 

 

GAAP subscription gross profit

 

$

20,965

 

 

$

17,980

 

 

$

60,630

 

 

$

51,532

 

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

412

 

 

435

 

 

1,429

 

 

1,364

 

Amortization of intangible assets (b)

 

282

 

 

476

 

 

911

 

 

1,428

 

Non-GAAP subscription gross profit

 

$

21,659

 

 

$

18,891

 

 

$

62,970

 

 

$

54,324

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Reconciliation from GAAP operating loss to non-GAAP operating income

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(380

)

 

$

(2,089

)

 

$

(6,969

)

 

$

(9,948

)

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

5,400

 

 

3,723

 

 

17,232

 

 

12,822

 

Amortization of intangible assets (b)

 

1,172

 

 

1,365

 

 

3,580

 

 

4,101

 

Non-GAAP operating income

 

$

6,192

 

 

$

2,999

 

 

$

13,843

 

 

$

6,975

 

 

 

 

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

 

 

Reconciliation between GAAP net loss and non-GAAP net income

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(2,380

)

 

$

(3,004

)

 

$

(10,007

)

 

$

(13,638

)

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

5,400

 

 

3,723

 

 

17,232

 

 

12,822

 

Amortization of intangible assets (b)

 

1,172

 

 

1,365

 

 

3,580

 

 

4,101

 

Amortization of debt discount and issuance costs (c)

 

$

970

 

 

$

?

 

 

$

970

 

 

$

?

 

Non-GAAP net income

 

$

5,162

 

 

$

2,084

 

 

$

11,775

 

 

$

3,285

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

Reconciliation between GAAP and non-GAAP net income (loss) per share

 

 

 

 

 

 

 

 

Shares used in computing GAAP net loss per share:

 

 

 

 

 

 

 

 

Basic

 

34,411

 

 

32,596

 

 

33,781

 

 

32,028

 

Diluted

 

34,411

 

 

32,596

 

 

33,781

 

 

32,028

 

Shares used in computing non-GAAP net income per share

 

 

 

 

 

 

 

 

Basic

 

34,411

 

 

32,596

 

 

33,781

 

 

32,028

 

Diluted

 

35,345

 

 

33,512

 

 

35,016

 

 

32,995

 

GAAP net loss per share

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.07

)

 

$

(0.09

)

 

$

(0.30

)

 

$

(0.43

)

Non-GAAP net income per share

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

0.06

 

 

$

0.35

 

 

$

0.10

 

Diluted

 

$

0.15

 

 

$

0.06

 

 

$

0.34

 

 

$

0.10

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Amortization of intangibles assets recorded in the statements of operations

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

Subscription

 

$

282

 

 

$

476

 

 

$

911

 

 

$

1,428

 

Professional services

 

?

 

 

?

 

 

?

 

 

?

 

Total amortization of intangibles assets in cost of revenue (b)

 

282

 

 

476

 

 

911

 

 

1,428

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

?

 

 

?

 

 

?

 

 

?

 

Sales and marketing

 

890

 

 

889

 

 

2,669

 

 

2,673

 

General and administrative

 

?

 

 

?

 

 

?

 

 

?

 

Total amortization of intangibles assets in operating expense (b)

 

890

 

 

889

 

 

2,669

 

 

2,673

 

Total amortization of intangibles assets (b)

 

$

1,172

 

 

$

1,365

 

 

$

3,580

 

 

$

4,101

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Stock-based compensation recorded in the statements of operations

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

Subscription

 

$

412

 

 

$

435

 

 

$

1,429

 

 

$

1,364

 

Professional services

 

528

 

 

503

 

 

1,685

 

 

1,543

 

Total stock-based compensation in cost of revenue (a)

 

940

 

 

938

 

 

3,114

 

 

2,907

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

1,074

 

 

771

 

 

3,743

 

 

2,396

 

Sales and marketing

 

1,527

 

 

440

 

 

4,589

 

 

2,824

 

General and administrative

 

1,859

 

 

1,574

 

 

5,786

 

 

4,695

 

Total stock-based compensation in operating expense (a)

 

4,460

 

 

2,785

 

 

14,118

 

 

9,915

 

Total stock-based compensation (a)

 

$

5,400

 

 

$

3,723

 

 

$

17,232

 

 

$

12,822

 

 

 

 

 

 

 

 

 

 

Use of Non-GAAP Financial Measures

 

To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of adjusted EBITDA, gross profit, gross margin, income from operations, net income, weighted average shares outstanding and net income per share, which are adjusted to exclude stock-based compensation expense, amortization of intangible assets, and amortization of debt discount and issuance costs related to our convertible senior notes and include dilutive shares where applicable. We believe these adjustments are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of our underlying operating results and trends and our marketplace performance. The non-GAAP results are an indication of our baseline performance that are considered by management for the purpose of making operational decisions. In addition, these non-GAAP results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for operating loss, net loss or basic and diluted net loss per share prepared in accordance with generally accepted accounting principles in the United States. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.

 

While a large component of our expenses incurred in certain periods, we believe investors may want to exclude the effects of these items in order to compare our financial performance with that of other companies and between time periods:

 

 

(a)

Stock-based compensation is a non-cash expense accounted for in accordance with FASB ASC Topic 718. Stock-based compensation is a non-cash item. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies.

 

 

(b)

Amortization of intangible assets resulted principally from acquisitions. Intangible asset amortization is a non-cash item. As such, we believe exclusion of these expenses provides for a better comparison of our operating results to prior periods and to our peer companies.

 

 

(c)

Amortization of debt discount and issuance costs. Amortization of debt discount and issuance costs is a non-cash item. As such, we believe exclusion of these expenses provides for a better comparison of our operating results to prior periods and to our peer companies.

 


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