Model N, Inc. MODN reported third-quarter fiscal 2020 non-GAAP earnings of 15 cents per share, which surpassed the Zacks Consensus Estimate by 150%. The bottom line also improved 150% year over year.
Revenues were $41.3 million, which beat the Zacks Consensus Estimate by 4.4% and increased 19% year over year. The figure was also higher than the guided range of $39.4-$39.8 million.
Robust adoption of the company’s revenue cloud platform drove the top line. Notably, a leading medtech company selected Model N’s Global Tender Management solution to accelerate its tendering process in 14 countries.
Moreover, the company is making steady progress in its transformation to a Software-as-a-Service (SaaS) based model, which is driving top-line growth.
Quarter in Detail
Model N reports earnings under two business lines — Subscription and Professional Services.
In third-quarter fiscal 2020, Subscription revenues were $29.3 million, up 10% year over year. This was driven by strong go-to-market execution and new logo additions.
Professional Services revenues increased 47.6% on a year-over-year basis to $11.9 million.
Model N, Inc. Price, Consensus and EPS Surprise
Non-GAAP gross margin expanded 560 basis points (bps) from the year-ago-figure to 64%.
Adjusted EBITDA during the quarter was $6.4 million, up 93.5%year over year.
Non-GAAP operating income was $6.2 million, up 106.5% year over year. Non-GAAP operating margin (as a percentage of total revenues) expanded 640 bps to 15%.
Balance Sheet & Cash Flow
As of Jun 30, 2020, Model N had cash and cash equivalents of $192.4 million compared with $61.3 million as of Mar 31, 2020.
As of Jun 30, 2020, the company had total debt (including current portion) of $112.2 million, compared with $39.4 million reported as of Mar 31, 2020.
Net cash flow from operating activities was $7.2 million for the first nine month-period ended Jun 30, 2020, compared with $4.8 million in the prior-year period. Free cash flow was reported at $7 million for the nine month-period of fiscal year 2020, compared with free cash flow of $4.6 million in the prior-year period.
The company anticipates fiscal fourth-quarter 2020 total revenues between $40.1 million and $40.5 million. The Zacks Consensus Estimate for revenues is pegged at $37.4 million.
Subscription revenues are projectedin the range of $29-$29.4 million.
Non-GAAP net income is anticipated in the range of 7-9 cents per share. The Zacks Consensus Estimate for earnings is pegged at 4 cents per share.
Adjusted EBITDA is expected between $4.6 million and $5 million.
For fiscal 2020, Model N now expects total revenues in the range of $159.7-$160.1 million compared with prior guided range of $154-$156 million. The Zacks Consensus Estimate for revenues stands at $155.2 million.
Fiscal 2020 subscription revenues are now forecast in the range of $115.5-$115.9 million compared with $114-$115 million.
Non-GAAP earnings are now expected in the range of 41-43 cents per share compared with the prior guided range of 28-31 cents. The Zacks Consensus Estimate for earnings is currently pegged at 29 cents per share.
Adjusted EBITDA is now projected in the band of $19-19.4 million, compared with the prior guided range of $14-$15 million.
Zacks Rank & Stocks to Consider
Currently, Model N carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Dropbox DBX, Asure Software, Inc. ASUR and Analog Devices ADI. While both Dropbox and Asure Software sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Dropbox, Asure Software, and Analog Devices are scheduled to report earnings on Aug 6, Aug 10 and Aug 19, respectively.
Long-term earnings growth rate of Dropbox, Asure Software, and Analog Devices is pegged at 16.83%, 14% and 13.33%, respectively.
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