Delaware | 001-35840 | 77-0528806 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
777 Mariners Island Boulevard, Suite 300 San Mateo, California 94404 | ||
(Address of Principal Executive Offices) (Zip Code) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, par value $0.00015 per share | MODN | New York Stock Exchange |
Exhibit Number | Description | |
99.1 |
MODEL N, INC. | |
(Registrant) | |
By: | /s/ David Barter |
David Barter | |
Senior Vice President and Chief Financial Officer |
• | 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. |
• | 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. |
(in $ millions, except per share) | Third Quarter Fiscal 2020 | Full Year Fiscal 2020 |
Total revenues | 39.4 - 39.8 | 154.0 - 156.0 |
Subscription revenues | 28.7 - 29.1 | 114.0 - 115.0 |
Non-GAAP income from operations | 3.2 - 3.6 | 13.0 - 14.0 |
Non-GAAP net income per share | 0.05 - 0.07 | 0.28 - 0.31 |
Adjusted EBITDA | 3.4 - 3.8 | 14.0 - 15.0 |
As of March 31, 2020 | As of September 30, 2019 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 61,283 | $ | 60,780 | |||
Accounts receivable, net | 26,448 | 26,953 | |||||
Prepaid expenses | 1,347 | 2,776 | |||||
Other current assets | 6,898 | 4,039 | |||||
Total current assets | 95,976 | 94,548 | |||||
Property and equipment, net | 726 | 1,043 | |||||
Operating lease right-of-use assets | 5,707 | — | |||||
Goodwill | 39,283 | 39,283 | |||||
Intangible assets, net | 26,723 | 29,131 | |||||
Other assets | 5,394 | 5,588 | |||||
Total assets | $ | 173,809 | $ | 169,593 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 3,172 | $ | 2,302 | |||
Accrued employee compensation | 11,148 | 19,906 | |||||
Accrued liabilities | 4,561 | 4,354 | |||||
Operating lease liabilities, current portion | 2,593 | — | |||||
Deferred revenue, current portion | 45,579 | 44,875 | |||||
Long term debt, current portion | 944 | 4,911 | |||||
Total current liabilities | 67,997 | 76,348 | |||||
Long-term liabilities | |||||||
Long term debt | 38,479 | 39,371 | |||||
Operating lease liabilities, less current portion | 3,481 | — | |||||
Other long-term liabilities | 1,630 | 1,152 | |||||
Total long-term liabilities | 43,590 | 40,523 | |||||
Total liabilities | 111,587 | 116,871 | |||||
Stockholders’ equity | |||||||
Common stock | 5 | 5 | |||||
Preferred stock | — | — | |||||
Additional paid-in capital | 284,099 | 266,295 | |||||
Accumulated other comprehensive loss | (1,846 | ) | (1,169 | ) | |||
Accumulated deficit | (220,036 | ) | (212,409 | ) | |||
Total stockholders’ equity | 62,222 | 52,722 | |||||
Total liabilities and stockholders’ equity | $ | 173,809 | $ | 169,593 | |||
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues | |||||||||||||||
Subscription | $ | 28,991 | $ | 25,940 | $ | 57,173 | $ | 51,142 | |||||||
Professional services | 10,961 | 8,903 | 21,167 | 18,778 | |||||||||||
Total revenues | 39,952 | 34,843 | 78,340 | 69,920 | |||||||||||
Cost of revenues | |||||||||||||||
Subscription | 8,798 | 8,852 | 17,508 | 17,590 | |||||||||||
Professional services | 7,685 | 7,894 | 15,327 | 15,723 | |||||||||||
Total cost of revenues | 16,483 | 16,746 | 32,835 | 33,313 | |||||||||||
Gross profit | 23,469 | 18,097 | 45,505 | 36,607 | |||||||||||
Operating expenses | |||||||||||||||
Research and development | 9,102 | 7,415 | 17,618 | 14,827 | |||||||||||
Sales and marketing | 10,953 | 8,598 | 19,966 | 16,650 | |||||||||||
General and administrative | 7,545 | 6,833 | 14,510 | 12,989 | |||||||||||
Total operating expenses | 27,600 | 22,846 | 52,094 | 44,466 | |||||||||||
Loss from operations | (4,131 | ) | (4,749 | ) | (6,589 | ) | (7,859 | ) | |||||||
Interest expense, net | 402 | 891 | 965 | 1,624 | |||||||||||
Other expenses (income), net | (243 | ) | 127 | (255 | ) | 412 | |||||||||
Loss before income taxes | (4,290 | ) | (5,767 | ) | (7,299 | ) | (9,895 | ) | |||||||
Provision for income taxes | 339 | 141 | 328 | 739 | |||||||||||
Net loss | $ | (4,629 | ) | $ | (5,908 | ) | $ | (7,627 | ) | $ | (10,634 | ) | |||
Net loss per share: | |||||||||||||||
Basic and diluted | $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.23 | ) | $ | (0.34 | ) | |||
Weighted average number of shares used in computing net loss per share: | |||||||||||||||
Basic and diluted | 33,794 | 31,999 | 33,468 | 31,741 | |||||||||||
Six Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Cash Flows from Operating Activities | |||||||
Net loss | $ | (7,627 | ) | $ | (10,634 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 2,813 | 3,533 | |||||
Stock-based compensation | 11,832 | 9,099 | |||||
Amortization of debt discount and issuance cost | 140 | 290 | |||||
Deferred income taxes | 35 | 6 | |||||
Amortization of capitalized contract acquisition costs | 1,242 | 780 | |||||
Other non-cash charges | (20 | ) | (108 | ) | |||
Changes in assets and liabilities | |||||||
Accounts receivable | 529 | 8,353 | |||||
Prepaid expenses and other assets | (1,278 | ) | 595 | ||||
Accounts payable | 876 | 862 | |||||
Accrued employee compensation | (4,895 | ) | (4,438 | ) | |||
Other current and long-term liabilities | (1,603 | ) | 708 | ||||
Deferred revenue | 1,391 | (8,581 | ) | ||||
Net cash provided by operating activities | 3,435 | 465 | |||||
Cash Flows from Investing Activities | |||||||
Purchases of property and equipment | (98 | ) | (167 | ) | |||
Net cash used in investing activities | (98 | ) | (167 | ) | |||
Cash Flows from Financing Activities | |||||||
Proceeds from exercise of stock options and issuance of employee stock purchase plan | 2,242 | 2,018 | |||||
Principal payments on debt | (5,000 | ) | (5,000 | ) | |||
Net cash used in financing activities | (2,758 | ) | (2,982 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (76 | ) | 70 | ||||
Net increase (decrease) in cash and cash equivalents | 503 | (2,614 | ) | ||||
Cash and cash equivalents | |||||||
Beginning of period | 60,780 | 56,704 | |||||
End of period | $ | 61,283 | $ | 54,090 | |||
Model N, Inc. | ||||||||||||||||
Reconciliation of GAAP to Non-GAAP Operating Results | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Reconciliation from GAAP net loss to adjusted EBITDA | ||||||||||||||||
GAAP net loss | $ | (4,629 | ) | $ | (5,908 | ) | $ | (7,627 | ) | $ | (10,634 | ) | ||||
Reversal of non-GAAP items | ||||||||||||||||
Stock-based compensation expense | 6,009 | 4,896 | 11,832 | 9,099 | ||||||||||||
Depreciation and amortization | 1,361 | 1,691 | 2,813 | 3,533 | ||||||||||||
Interest expense, net | 402 | 891 | 965 | 1,624 | ||||||||||||
Other expenses (income), net | (243 | ) | 127 | (255 | ) | 412 | ||||||||||
Provision for income taxes | 339 | 141 | 328 | 739 | ||||||||||||
Adjusted EBITDA | $ | 3,239 | $ | 1,838 | $ | 8,056 | $ | 4,773 | ||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Reconciliation from GAAP gross profit to non-GAAP gross profit | ||||||||||||||||
GAAP gross profit | $ | 23,469 | $ | 18,097 | $ | 45,505 | $ | 36,607 | ||||||||
Reversal of non-GAAP expenses | ||||||||||||||||
Stock-based compensation (a) | 1,055 | 1030 | 2,174 | 1,969 | ||||||||||||
Amortization of intangible assets (b) | 282 | 476 | 629 | 952 | ||||||||||||
Non-GAAP gross profit | $ | 24,806 | $ | 19,603 | $ | 48,308 | $ | 39,528 | ||||||||
Percentage of revenue | 62.1 | % | 56.3 | % | 61.7 | % | 56.5 | % | ||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Reconciliation from GAAP subscription gross profit to non-GAAP subscription gross profit | ||||||||||||||||
GAAP subscription gross profit | $ | 20,193 | $ | 17,088 | $ | 39,665 | $ | 33,552 | ||||||||
Reversal of non-GAAP expenses | ||||||||||||||||
Stock-based compensation (a) | 495 | 469 | 1,017 | 929 | ||||||||||||
Amortization of intangible assets (b) | 282 | 476 | 629 | 952 | ||||||||||||
Non-GAAP subscription gross profit | $ | 20,970 | $ | 18,033 | $ | 41,311 | $ | 35,433 |
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Reconciliation from GAAP operating loss to non-GAAP operating income | ||||||||||||||||
GAAP operating loss | $ | (4,131 | ) | $ | (4,749 | ) | $ | (6,589 | ) | $ | (7,859 | ) | ||||
Reversal of non-GAAP expenses | ||||||||||||||||
Stock-based compensation (a) | 6,009 | 4,896 | 11,832 | 9,099 | ||||||||||||
Amortization of intangible assets (b) | 1,171 | 1,365 | 2,408 | 2,736 | ||||||||||||
Non-GAAP operating income | $ | 3,049 | $ | 1,512 | $ | 7,651 | $ | 3,976 | ||||||||
Numerator | ||||||||||||||||
Reconciliation between GAAP net loss and non-GAAP net income | ||||||||||||||||
GAAP net loss | $ | (4,629 | ) | $ | (5,908 | ) | $ | (7,627 | ) | $ | (10,634 | ) | ||||
Reversal of non-GAAP expenses | ||||||||||||||||
Stock-based compensation (a) | 6,009 | 4,896 | 11,832 | 9,099 | ||||||||||||
Amortization of intangible assets (b) | 1,171 | 1,365 | 2,408 | 2,736 | ||||||||||||
Non-GAAP net income | $ | 2,551 | $ | 353 | $ | 6,613 | $ | 1,201 | ||||||||
Denominator | ||||||||||||||||
Reconciliation between GAAP and non-GAAP net income (loss) per share | ||||||||||||||||
Shares used in computing GAAP net loss per share: | ||||||||||||||||
Basic | 33,794 | 31,999 | 33,468 | 31,741 | ||||||||||||
Diluted | 33,794 | 31,999 | 33,468 | 31,741 | ||||||||||||
Shares used in computing non-GAAP net income per share | ||||||||||||||||
Basic | 33,794 | 31,999 | 33,468 | 31,741 | ||||||||||||
Diluted | 35,071 | 32,997 | 34,854 | 32,707 | ||||||||||||
GAAP net loss per share | ||||||||||||||||
Basic and diluted | $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.23 | ) | $ | (0.34 | ) | ||||
Non-GAAP net income per share | ||||||||||||||||
Basic | $ | 0.08 | $ | 0.01 | $ | 0.20 | $ | 0.04 | ||||||||
Diluted | $ | 0.07 | $ | 0.01 | $ | 0.19 | $ | 0.04 |
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Amortization of intangibles assets recorded in the statements of operations | ||||||||||||||||
Cost of revenues | ||||||||||||||||
Subscription | $ | 282 | $ | 476 | $ | 629 | $ | 952 | ||||||||
Professional services | — | — | — | — | ||||||||||||
Total amortization of intangibles assets in cost of revenue (b) | 282 | 476 | 629 | 952 | ||||||||||||
Operating expenses | ||||||||||||||||
Research and development | — | — | — | — | ||||||||||||
Sales and marketing | 889 | 889 | 1,779 | 1,784 | ||||||||||||
General and administrative | — | — | — | — | ||||||||||||
Total amortization of intangibles assets in operating expense (b) | 889 | 889 | 1,779 | 1,784 | ||||||||||||
Total amortization of intangibles assets (b) | $ | 1,171 | $ | 1,365 | $ | 2,408 | $ | 2,736 | ||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Stock-based compensation recorded in the statements of operations | ||||||||||||||||
Cost of revenues | ||||||||||||||||
Subscription | $ | 495 | $ | 469 | $ | 1,017 | $ | 929 | ||||||||
Professional services | 560 | 561 | 1,157 | 1,040 | ||||||||||||
Total stock-based compensation in cost of revenue (a) | 1,055 | 1,030 | 2,174 | 1,969 | ||||||||||||
Operating expenses | ||||||||||||||||
Research and development | 1,243 | 861 | 2,669 | 1,625 | ||||||||||||
Sales and marketing | 1,656 | 1,239 | 3,062 | 2,384 | ||||||||||||
General and administrative | 2,055 | 1,766 | 3,927 | 3,121 | ||||||||||||
Total stock-based compensation in operating expense (a) | 4,954 | 3,866 | 9,658 | 7,130 | ||||||||||||
Total stock-based compensation (a) | $ | 6,009 | $ | 4,896 | $ | 11,832 | $ | 9,099 | ||||||||
(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. |