Model N, Inc. (NYSE: MODN), a leader in cloud revenue management solutions, today announced financial results for the second quarter of fiscal year 2024 ended March 31, 2024. Second Quarter 2024 Finan...
SAN MATEO, Calif.: Model N, Inc. (NYSE: MODN), a leader in cloud revenue management solutions, today announced financial results for the second quarter of fiscal year 2024 ended March 31, 2024.
Second Quarter 2024 Financial Highlights
A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial tables included in this press release.
Transaction with Vista Equity Partners
Due to the Company’s pending acquisition by affiliates of Vista Equity Partners that was announced on April 8, 2024 there will not be a conference call or live webcast to discuss these financial results. In addition, the Company will not be providing financial guidance for the third quarter of fiscal year 2024 and is suspending its financial guidance for the full fiscal year 2024 as a result of the pending transaction.
About Model N
Model N is a leader in revenue optimization and compliance for pharmaceutical, medtech, and high-tech innovators. Our intelligent platform powers your digital transformation with integrated technology, data, analytics, and expert services that deliver deep insight and control.
Our integrated cloud solution is proven to automate pricing, incentive, and contract decisions to scale business profitably and grow revenue. Model N is trusted across more than 120 countries by the world’s leading pharmaceutical, medical technology, semiconductor, and high-tech companies, including Johnson & Johnson, AstraZeneca, Stryker, Seagate Technology, Broadcom, and Microchip Technology. For more information, visit www.modeln.com.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This press release may be deemed to be solicitation material in respect of the proposed transaction involving Model N, Inc. (“Model N”) and affiliates of Vista Equity Partners. In connection with the proposed transaction, Model N has filed a preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission (the “SEC”) and intends to file a definitive proxy statement on Schedule 14A and furnish to stockholders a proxy statement and WHITE proxy card. This press release is not a substitute for the proxy statement or any other document that Model N may file with the SEC or send to its stockholders in connection with the proposed transaction. INVESTORS AND STOCKHOLDERS OF MODEL N ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MODEL N AND THE PROPOSED TRANSACTION. The preliminary proxy statement and future materials to be filed by Model N will be made available to Model N’s investors and stockholders at no expense to them and copies may be obtained free of charge on Model N’s website at https://investor.modeln.com/. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov.
Model N and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of Model N stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of Model N’s executive officers and directors in the solicitation by reading the preliminary proxy statement filed with the SEC in connection with the transaction, the Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and the subsequent Quarterly Reports on Form 10-Q, and the definitive proxy statement and other relevant materials that will be filed with the SEC in connection with the proposed transaction when they become available. Information concerning the interests of Model N’s participants in the solicitation, which may, in some cases, be different than those of the Model N’s stockholders generally, are set forth in the preliminary proxy statement filed with the SEC and will be set forth in the definitive proxy statement relating to the proposed transaction when it becomes available.
Forward-Looking Statements
This press release may contain forward-looking statements including, among other things, statements regarding the potential merger and financial results of the Model N, as well as any assumptions underlying any of the foregoing. 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) the ability to obtain the requisite approval from stockholders of Model N; (ii) the risk that the proposed transaction may not be completed in a timely manner or at all; (iii) the possibility that competing offers or acquisition proposals for Model N will be made; (iv) the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities; (v) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including in circumstances that would require Model N to pay a termination fee or other expenses; (vi) the effect of the pendency of the proposed transaction on Model N’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, its business generally or its stock price; (vii) risks related to diverting management’s attention from Model N’s ongoing business operations or the loss of one or more members of the management team; (viii) the risk that stockholder litigation in connection with the proposed transaction may result in significant costs of defense, indemnification and liability; (ix) delays in closing customer contracts; (x) Model N’s ability to improve and sustain its sales execution, including increasing bookings and growing revenues; (xi) the timing of new orders and the associated revenue recognition; (xii) adverse changes in general economic or market conditions; (xiii) delays or reductions in information technology spending and resulting variability in customer orders from quarter to quarter; (xiv) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by Model N’s competitors; (xv) Model N’s ability to increase and manage its growth effectively; (xvi) acceptance of Model N’s applications and services by customers; (xvii) success of new products; (xviii) the risk that the strategic initiatives that Model N may pursue will not result in significant future revenues; (xiv) changes in health care regulation and policy and tax in the United States and worldwide; (xx) Model N’s ability to retain customers; and (xxi) adverse impacts on Model N’s business and financial condition due to macroeconomic and geopolitical factors, such as inflation, rising interests, pandemics, banking system instability and geopolitical conflicts. Further information on risks that could affect Model N’s results is included in its filings with the SEC, including its most recent quarterly report on Form 10-Q and its annual report on Form 10-K for the fiscal year ended September 30, 2023, and any current reports on Form 8-K that it 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 communication.
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 from operations, non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and free cash flow. Non-GAAP gross profit and subscription gross profit excludes stock-based compensation expenses and amortization of intangible assets as they are often excluded by other companies to help investors understand the operational performance of their business. Non-GAAP income from operations excludes stock-based compensation expense and amortization of intangible assets. Non-GAAP net income excludes stock-based compensation expense, amortization of intangible assets, amortization of debt issuance costs, and loss on extinguishment of debt. 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, interest expenses, interest income, other income (expenses), net, provision for income taxes, and loss on extinguishment of debt. Reconciliation tables are provided in this press release.
SaaS ARR is defined as the annualized value of our SaaS revenue, which is derived by dividing the SaaS portion of our recurring subscription revenue for the quarter by the number of days in the quarter, and multiplying it by 365 to get an annualized number. SaaS Net Dollar Retention uses the same SaaS ARR calculations to measure the percentage change in SaaS ARR from customers that are in the current period and the year-ago period. SaaS ARR that has been added from new customers that were not in the year-ago calculation is excluded from the SaaS Net Dollar Retention calculation. SaaS Net Dollar Retention has been reduced by any amount of churn for the customers that were in the year-ago period. SaaS ARR and SaaS Net Dollar Retention should be viewed independently of revenue, deferred revenue, and remaining performance obligations, and are not intended to be a substitute for, or combined with, any of these items.
Free cash flow is defined as net cash provided by operating activities less cash used for purchase of property plant and equipment.
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 March 31, 2024 |
| As of September 30, 2023 | ||||
Assets |
|
|
| ||||
Current assets |
|
|
| ||||
Cash and cash equivalents | $ | 334,559 |
|
| $ | 301,355 |
|
Funds held for customers |
| 86 |
|
|
| 91 |
|
Accounts receivable, net |
| 79,260 |
|
|
| 61,761 |
|
Prepaid expenses |
| 4,610 |
|
|
| 5,922 |
|
Other current assets |
| 8,462 |
|
|
| 14,777 |
|
Total current assets |
| 426,977 |
|
|
| 383,906 |
|
Property and equipment, net |
| 1,125 |
|
|
| 1,242 |
|
Operating lease right-of-use assets |
| 7,707 |
|
|
| 9,885 |
|
Goodwill |
| 65,665 |
|
|
| 65,665 |
|
Intangible assets, net |
| 26,795 |
|
|
| 30,176 |
|
Other assets |
| 10,131 |
|
|
| 9,221 |
|
Total assets | $ | 538,400 |
|
| $ | 500,095 |
|
Liabilities and Stockholders’ Equity |
|
|
| ||||
Current liabilities |
|
|
| ||||
Accounts payable | $ | 4,483 |
|
| $ | 3,888 |
|
Customer funds payable |
| 86 |
|
|
| 91 |
|
Accrued employee compensation |
| 14,257 |
|
|
| 14,645 |
|
Accrued liabilities |
| 5,485 |
|
|
| 8,700 |
|
Operating lease liabilities, current portion |
| 4,151 |
|
|
| 4,408 |
|
Deferred revenue, current portion |
| 82,074 |
|
|
| 61,745 |
|
Total current liabilities |
| 110,536 |
|
|
| 93,477 |
|
Long-term liabilities |
|
|
| ||||
Long term debt |
| 281,203 |
|
|
| 280,358 |
|
Operating lease liabilities, less current portion |
| 4,705 |
|
|
| 6,755 |
|
Other long-term liabilities |
| 4,933 |
|
|
| 4,042 |
|
Total long-term liabilities |
| 290,841 |
|
|
| 291,155 |
|
Total liabilities |
| 401,377 |
|
|
| 384,632 |
|
Stockholders’ equity |
|
|
| ||||
Common stock |
| 6 |
|
|
| 6 |
|
Additional paid-in capital |
| 439,297 |
|
|
| 414,562 |
|
Accumulated other comprehensive loss |
| (2,235 | ) |
|
| (2,245 | ) |
Accumulated deficit |
| (300,045 | ) |
|
| (296,860 | ) |
Total stockholders’ equity |
| 137,023 |
|
|
| 115,463 |
|
Total liabilities and stockholders’ equity | $ | 538,400 |
|
| $ | 500,095 |
|
|
|
|
|
Model N, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | |||||||||||||||
| Three Months Ended March 31, |
| Six Months Ended March 31, | ||||||||||||
|
| 2024 |
|
|
| 2023 |
|
|
| 2024 |
|
|
| 2023 |
|
Revenues |
|
|
|
|
|
|
| ||||||||
Subscription | $ | 49,182 |
|
| $ | 44,925 |
|
| $ | 96,837 |
|
| $ | 89,139 |
|
Professional services |
| 15,929 |
|
|
| 17,679 |
|
|
| 31,765 |
|
|
| 32,619 |
|
Total revenues |
| 65,111 |
|
|
| 62,604 |
|
|
| 128,602 |
|
|
| 121,758 |
|
Cost of revenues |
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