0001118417-21-000121.txt : 20210809 0001118417-21-000121.hdr.sgml : 20210809 20210809163500 ACCESSION NUMBER: 0001118417-21-000121 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 76 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210809 DATE AS OF CHANGE: 20210809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODEL N, INC. CENTRAL INDEX KEY: 0001118417 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 770528806 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35840 FILM NUMBER: 211157014 BUSINESS ADDRESS: STREET 1: 777 MARINERS ISLAND BOULEVARD STREET 2: SUITE 300 CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: (650) 610-4600 MAIL ADDRESS: STREET 1: 777 MARINERS ISLAND BOULEVARD STREET 2: SUITE 300 CITY: SAN MATEO STATE: CA ZIP: 94404 FORMER COMPANY: FORMER CONFORMED NAME: MODEL T1 INC DATE OF NAME CHANGE: 20001031 FORMER COMPANY: FORMER CONFORMED NAME: MODEL N INC DATE OF NAME CHANGE: 20000707 10-Q 1 modn-20210630.htm 10-Q modn-20210630
false2021Q30001118417September 30P5DP5D0.03000440.038255500011184172020-10-012021-06-30xbrli:shares00011184172021-07-30iso4217:USD00011184172021-06-3000011184172020-09-30iso4217:USDxbrli:shares0001118417us-gaap:LicenseAndServiceMember2021-04-012021-06-300001118417us-gaap:LicenseAndServiceMember2020-04-012020-06-300001118417us-gaap:LicenseAndServiceMember2020-10-012021-06-300001118417us-gaap:LicenseAndServiceMember2019-10-012020-06-300001118417modn:ProfessionalServicesMember2021-04-012021-06-300001118417modn:ProfessionalServicesMember2020-04-012020-06-300001118417modn:ProfessionalServicesMember2020-10-012021-06-300001118417modn:ProfessionalServicesMember2019-10-012020-06-3000011184172021-04-012021-06-3000011184172020-04-012020-06-3000011184172019-10-012020-06-3000011184172019-09-3000011184172020-06-3000011184172021-07-012021-06-30xbrli:pure0001118417srt:MinimumMember2021-06-300001118417srt:MaximumMember2021-06-300001118417us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001118417us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001118417us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001118417us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001118417us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-312020-12-310001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-10-012021-06-300001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-310001118417us-gaap:CustomerRelationshipsMembermodn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-310001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMemberus-gaap:DevelopedTechnologyRightsMember2020-12-310001118417us-gaap:NoncompeteAgreementsMembermodn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-310001118417us-gaap:TradeNamesMembermodn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-310001118417us-gaap:CustomerRelationshipsMembermodn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-312020-12-310001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMemberus-gaap:DevelopedTechnologyRightsMember2020-12-312020-12-310001118417us-gaap:NoncompeteAgreementsMembermodn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-312020-12-310001118417us-gaap:TradeNamesMembermodn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-12-312020-12-310001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMember2021-04-012021-06-300001118417modn:NetAssetsAcquiredFromDeloitteToucheLLPMember2020-01-012021-06-300001118417us-gaap:CustomerRelationshipsMembersrt:MinimumMember2020-10-012021-06-300001118417srt:MaximumMemberus-gaap:CustomerRelationshipsMember2020-10-012021-06-300001118417us-gaap:CustomerRelationshipsMember2021-06-300001118417srt:MinimumMemberus-gaap:DevelopedTechnologyRightsMember2020-10-012021-06-300001118417srt:MaximumMemberus-gaap:DevelopedTechnologyRightsMember2020-10-012021-06-300001118417us-gaap:DevelopedTechnologyRightsMember2021-06-300001118417us-gaap:NoncompeteAgreementsMember2020-10-012021-06-300001118417us-gaap:NoncompeteAgreementsMember2021-06-300001118417us-gaap:TradeNamesMember2020-10-012021-06-300001118417us-gaap:TradeNamesMember2021-06-300001118417us-gaap:CustomerRelationshipsMembersrt:MinimumMember2019-10-012020-09-300001118417srt:MaximumMemberus-gaap:CustomerRelationshipsMember2019-10-012020-09-300001118417us-gaap:CustomerRelationshipsMember2020-09-300001118417srt:MinimumMemberus-gaap:DevelopedTechnologyRightsMember2019-10-012020-09-300001118417srt:MaximumMemberus-gaap:DevelopedTechnologyRightsMember2019-10-012020-09-300001118417us-gaap:DevelopedTechnologyRightsMember2020-09-300001118417us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2020-10-012021-06-300001118417us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2021-06-300001118417us-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2020-09-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-310001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-012020-05-310001118417modn:CreditAgreementMembermodn:TermLoanMember2020-05-012020-05-31utr:D0001118417us-gaap:DebtInstrumentRedemptionPeriodOneMembermodn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-012020-05-310001118417us-gaap:EstimateOfFairValueFairValueDisclosureMembermodn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-310001118417us-gaap:InterestExpenseMembermodn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-310001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2021-06-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-09-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2021-04-012021-06-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-04-012020-06-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-10-012021-06-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2019-10-012020-06-300001118417modn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-06-300001118417us-gaap:EstimateOfFairValueFairValueDisclosureMembermodn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2021-06-300001118417srt:MaximumMembermodn:ConvertibleTwoPointSixFivePercentSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-012020-05-310001118417us-gaap:CommonStockMember2021-03-310001118417us-gaap:AdditionalPaidInCapitalMember2021-03-310001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001118417us-gaap:RetainedEarningsMember2021-03-3100011184172021-03-310001118417us-gaap:CommonStockMember2021-04-012021-06-300001118417us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001118417us-gaap:RetainedEarningsMember2021-04-012021-06-300001118417us-gaap:CommonStockMember2021-06-300001118417us-gaap:AdditionalPaidInCapitalMember2021-06-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001118417us-gaap:RetainedEarningsMember2021-06-300001118417us-gaap:CommonStockMember2020-03-310001118417us-gaap:AdditionalPaidInCapitalMember2020-03-310001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001118417us-gaap:RetainedEarningsMember2020-03-3100011184172020-03-310001118417us-gaap:CommonStockMember2020-04-012020-06-300001118417us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001118417us-gaap:RetainedEarningsMember2020-04-012020-06-300001118417us-gaap:CommonStockMember2020-06-300001118417us-gaap:AdditionalPaidInCapitalMember2020-06-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001118417us-gaap:RetainedEarningsMember2020-06-300001118417us-gaap:CommonStockMember2020-09-300001118417us-gaap:AdditionalPaidInCapitalMember2020-09-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001118417us-gaap:RetainedEarningsMember2020-09-300001118417us-gaap:CommonStockMember2020-10-012021-06-300001118417us-gaap:AdditionalPaidInCapitalMember2020-10-012021-06-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-012021-06-300001118417us-gaap:RetainedEarningsMember2020-10-012021-06-300001118417us-gaap:CommonStockMember2019-09-300001118417us-gaap:AdditionalPaidInCapitalMember2019-09-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001118417us-gaap:RetainedEarningsMember2019-09-300001118417us-gaap:CommonStockMember2019-10-012020-06-300001118417us-gaap:AdditionalPaidInCapitalMember2019-10-012020-06-300001118417us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-10-012020-06-300001118417us-gaap:RetainedEarningsMember2019-10-012020-06-300001118417us-gaap:RestrictedStockUnitsRSUMember2020-09-300001118417us-gaap:RestrictedStockUnitsRSUMember2020-10-012021-06-300001118417us-gaap:RestrictedStockUnitsRSUMember2021-06-300001118417us-gaap:CostOfSalesMemberus-gaap:LicenseAndServiceMember2021-04-012021-06-300001118417us-gaap:CostOfSalesMemberus-gaap:LicenseAndServiceMember2020-04-012020-06-300001118417us-gaap:CostOfSalesMemberus-gaap:LicenseAndServiceMember2020-10-012021-06-300001118417us-gaap:CostOfSalesMemberus-gaap:LicenseAndServiceMember2019-10-012020-06-300001118417us-gaap:CostOfSalesMembermodn:ProfessionalServicesMember2021-04-012021-06-300001118417us-gaap:CostOfSalesMembermodn:ProfessionalServicesMember2020-04-012020-06-300001118417us-gaap:CostOfSalesMembermodn:ProfessionalServicesMember2020-10-012021-06-300001118417us-gaap:CostOfSalesMembermodn:ProfessionalServicesMember2019-10-012020-06-300001118417us-gaap:CostOfSalesMember2021-04-012021-06-300001118417us-gaap:CostOfSalesMember2020-04-012020-06-300001118417us-gaap:CostOfSalesMember2020-10-012021-06-300001118417us-gaap:CostOfSalesMember2019-10-012020-06-300001118417us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-06-300001118417us-gaap:ResearchAndDevelopmentExpenseMember2020-04-012020-06-300001118417us-gaap:ResearchAndDevelopmentExpenseMember2020-10-012021-06-300001118417us-gaap:ResearchAndDevelopmentExpenseMember2019-10-012020-06-300001118417us-gaap:SellingAndMarketingExpenseMember2021-04-012021-06-300001118417us-gaap:SellingAndMarketingExpenseMember2020-04-012020-06-300001118417us-gaap:SellingAndMarketingExpenseMember2020-10-012021-06-300001118417us-gaap:SellingAndMarketingExpenseMember2019-10-012020-06-300001118417us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001118417us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300001118417us-gaap:GeneralAndAdministrativeExpenseMember2020-10-012021-06-300001118417us-gaap:GeneralAndAdministrativeExpenseMember2019-10-012020-06-300001118417us-gaap:OperatingExpenseMember2021-04-012021-06-300001118417us-gaap:OperatingExpenseMember2020-04-012020-06-300001118417us-gaap:OperatingExpenseMember2020-10-012021-06-300001118417us-gaap:OperatingExpenseMember2019-10-012020-06-300001118417us-gaap:EmployeeStockOptionMember2020-10-012021-06-300001118417us-gaap:EmployeeStockOptionMember2019-10-012020-06-300001118417modn:PerformanceBasedRestrictedStockUnitsAndRestrictedStockUnitsMember2020-10-012021-06-300001118417modn:PerformanceBasedRestrictedStockUnitsAndRestrictedStockUnitsMember2019-10-012020-06-300001118417us-gaap:StockCompensationPlanMember2020-10-012021-06-300001118417us-gaap:StockCompensationPlanMember2019-10-012020-06-300001118417us-gaap:ConvertibleDebtSecuritiesMember2020-10-012021-06-300001118417us-gaap:ConvertibleDebtSecuritiesMember2019-10-012020-06-30modn:segmentmodn:business0001118417us-gaap:GeographicConcentrationRiskMemberus-gaap:NonUsMemberus-gaap:SalesRevenueNetMember2021-04-012021-06-300001118417us-gaap:GeographicConcentrationRiskMemberus-gaap:NonUsMemberus-gaap:SalesRevenueNetMember2020-04-012020-06-300001118417us-gaap:GeographicConcentrationRiskMemberus-gaap:NonUsMemberus-gaap:SalesRevenueNetMember2020-10-012021-06-300001118417us-gaap:GeographicConcentrationRiskMemberus-gaap:NonUsMemberus-gaap:SalesRevenueNetMember2019-10-012020-06-300001118417country:US2021-06-300001118417country:US2020-09-300001118417country:IN2021-06-300001118417country:IN2020-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35840
Model N, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 77-0528806
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
   
777 Mariners Island Boulevard,Suite 300 94404
San Mateo,California
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (650) 610-4600
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.00015 per shareMODNNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer
Non-accelerated filer☐  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  ý
As of July 30, 2021, the registrant had 35,784,003 shares of common stock outstanding.
1

  Page
  
PART I. FINANCIAL INFORMATION 
  
Item 1.
  
 
   
 
   
 
   
 
   
 
  
Item 2.
  
Item 3.
  
Item 4.
  
PART II. OTHER INFORMATION 
  
Item 1.
  
Item 1A.
  
Item 2.
  
Item 3.
  
Item 4.
  
Item 5.
  
Item 6.
  
 
1

PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)
MODEL N, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
As of
June 30, 2021
As of
September 30, 2020
Assets  
Current assets  
Cash and cash equivalents$153,766 $200,491 
Funds held for customers6,908  
Accounts receivable, net of allowance for doubtful accounts of $222 as of June 30, 2021 and $47 as of September 30, 2020
42,029 35,796 
Prepaid expenses3,740 2,797 
Other current assets7,443 7,314 
Total current assets213,886 246,398 
Property and equipment, net1,793 1,034 
Operating lease right-of-use assets20,437 3,332 
Goodwill65,665 39,283 
Intangible assets, net47,402 24,380 
Other assets7,601 5,863 
Total assets$356,784 $320,290 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$4,831 $3,009 
Customer funds payable6,908  
Accrued employee compensation21,617 17,056 
Accrued liabilities3,841 5,237 
Operating lease liabilities, current portion4,035 1,460 
Deferred revenue, current portion53,595 50,904 
Total current liabilities94,827 77,666 
Long term debt121,724 114,438 
Operating lease liabilities, less current portion17,012 2,067 
Other long-term liabilities1,925 1,448 
Total liabilities235,488 195,619 
Commitments and contingencies
Stockholders’ equity
Common Stock, $0.00015 par value; 200,000 shares authorized; 35,784 and 34,821 shares issued and outstanding at June 30, 2021 and September 30, 2020, respectively
5 5 
Preferred Stock, $0.00015 par value; 5,000 shares authorized; no shares issued and outstanding
  
Additional paid-in capital372,263 351,952 
Accumulated other comprehensive loss(1,231)(1,213)
Accumulated deficit(249,741)(226,073)
Total stockholders’ equity121,296 124,671 
Total liabilities and stockholders’ equity$356,784 $320,290 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

MODEL N, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 Three Months Ended June 30,Nine Months Ended June 30,
 2021202020212020
Revenues    
Subscription$36,908 $29,339 $104,284 $86,512 
Professional services14,130 11,917 37,680 33,084 
Total revenues51,038 41,256 141,964 119,596 
Cost of revenues
Subscription13,799 8,374 36,525 25,882 
Professional services9,651 7,699 27,418 23,026 
Total cost of revenues23,450 16,073 63,943 48,908 
Gross profit27,588 25,183 78,021 70,688 
Operating expenses
Research and development11,674 8,288 32,866 25,906 
Sales and marketing11,146 9,716 32,111 29,682 
General and administrative8,653 7,559 25,052 22,069 
Total operating expenses31,473 25,563 90,029 77,657 
Loss from operations(3,885)(380)(12,008)(6,969)
Interest expense, net3,631 1,986 10,645 2,951 
Other expenses (income), net(39)(168)175 (423)
Loss before income taxes(7,477)(2,198)(22,828)(9,497)
Provision for income taxes352 182 840 510 
Net loss$(7,829)$(2,380)$(23,668)$(10,007)
Net loss per share attributable to common stockholders:
Basic and diluted$(0.22)$(0.07)$(0.67)$(0.30)
Weighted average number of shares used in computing net loss per share attributable to common stockholders:
Basic and diluted35,679 34,411 35,305 33,781 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

MODEL N, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(Unaudited)
 Three Months Ended June 30,Nine Months Ended June 30,
 2021202020212020
Net loss$(7,829)$(2,380)$(23,668)$(10,007)
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on cash flow hedges(16)222 (7)(210)
Foreign currency translation gain (loss)(87)(3)(11)(248)
Total comprehensive loss$(7,932)$(2,161)$(23,686)$(10,465)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

MODEL N, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 Nine Months Ended June 30,
 20212020
Cash flows from operating activities  
Net loss$(23,668)$(10,007)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization5,740 4,163 
Stock-based compensation21,850 17,232 
Amortization of debt discount and issuance costs7,286 1,118 
Deferred income taxes84 25 
Amortization of capitalized contract acquisition costs2,223 1,858 
Loss on early extinguishment of debt 319 
Changes in assets and liabilities, net of acquisition
Accounts receivable(2,382)(2,292)
Prepaid expenses and other assets(2,470)(3,621)
Accounts payable1,849 781 
Accrued employee compensation745 (1,165)
Other current and long-term liabilities (3,095)(2,322)
Deferred revenue1,528 1,133 
Net cash provided by operating activities9,690 7,222 
Cash flows from investing activities
Purchases of property and equipment(842)(190)
Acquisition of business(57,849) 
Net cash used in investing activities(58,691)(190)
Cash flows from financing activities
Proceeds from exercise of stock options and issuance of employee stock purchase
plan
2,306 2,442 
Proceeds from issuance of convertible senior notes, net of issuance costs 166,894 
Principal payments on debt (44,750)
Net changes in customer funds payable6,908  
Net cash provided by financing activities9,214 124,586 
Effect of exchange rate changes on cash and cash equivalents(30)(26)
Net increase (decrease) in cash and cash equivalents(39,817)131,592 
Cash and cash equivalents
Beginning of period200,491 60,780 
End of period$160,674 $192,372 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

MODEL N, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.The Company and Significant Accounting Policies and Estimates
Model N, Inc. (“Model N,” “we,” “us,” “our,” and “the Company”) was incorporated in Delaware on December 14, 1999. The Company is a provider of cloud revenue management solutions for the life sciences and high tech industries. The Company’s software and business services enable its customers to maximize revenues and reduce revenue compliance risk by transforming their revenue life cycle from a series of tactical, disjointed operations into a strategic end-to-end process, which enables them to manage the strategy and execution of pricing, contracting, incentives and rebates. The Company’s corporate headquarters are located in San Mateo, California, with additional offices in the United States, India and Switzerland.
Fiscal Year
The Company’s fiscal year ends on September 30. References to fiscal year 2021, for example, refer to the fiscal year ending September 30, 2021.

Basis for Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated balance sheet as of September 30, 2020 has been derived from the audited financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (“the Annual Report”) on file with the SEC. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report.

In the opinion of management, the unaudited interim consolidated financial statements include all the normal recurring adjustments necessary to present fairly our condensed consolidated financial statements. The results of operations for the nine months ended June 30, 2021 are not necessarily indicative of the operating results for the full fiscal year 2021 or any future periods.

The condensed consolidated financial statements include the accounts of Model N and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, liability and equity allocation of convertible senior notes, legal contingencies, income taxes, stock-based compensation and valuation of goodwill and intangibles. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors. However, actual results could differ significantly from these estimates.

COVID-19
The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. At this point, the extent to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. The estimates discussed above may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.
6

New Accounting Pronouncements
Recently Adopted Accounting Guidance
In August 2018, the FASB issued ASU 2018-15, Intangibles (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard also requires customers to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance prospectively in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company adopted this guidance in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. ASU 2020-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
Significant Accounting Policies
There have been no changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended September 30, 2020 included in the Annual Report on Form 10-K.

2.     Revenues from Contracts with Customers

Revenue Recognition

The Company derives revenues primarily from subscription revenues and professional services revenues.

Disaggregation of Revenues

See Note 14, Geographic Information, for information on revenue by geography.

7

Customer Contract Balances

The following table reflects contract balances related to contracts with customers (in thousands):
As of
June 30, 2021
As of
September 30, 2020
Accounts receivable, net$42,029 $35,796 
Contract asset4,040 4,482 
Deferred revenue54,879 51,786 
Capitalized contract acquisition costs9,565 7,506 

Accounts Receivable
Accounts receivable represents the Company’s right to consideration that is unconditional, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of accounts receivable amounts.

Contract Asset
Contract asset represents revenue that has been recognized for satisfied performance obligations for which the Company does not have an unconditional right to consideration.

Deferred Revenue
Deferred revenue, which is a contract liability, consists of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred.

The non-current portion of deferred revenue is included in other long-term liabilities in the condensed consolidated balance sheets. During the three and nine months ended June 30, 2021, the Company recognized revenue of $24.5 million and $45.3 million, respectively, that was included in the deferred revenue balances at the beginning of the periods. During the three and nine months ended June 30, 2020, the Company recognized revenue of $20.8 million and $39.8 million, respectively, that was included in the deferred revenue balances at the beginning of the periods.

Capitalized Contract Acquisition Costs

The Company capitalizes incremental costs incurred to acquire contracts with customers, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. The Company incurs these costs in connection with both initial contracts and renewals. Such costs for renewals are not considered commensurate with those for initial contracts given the substantive difference in commission rates in proportion to their respective contract values. The costs in connection with initial contracts and renewals are deferred and amortized over an expected customer life of five years and over the renewal term, respectively, which corresponds to the period of benefit to the customer. The Company determined the period of benefit by considering the Company’s history of customer relationships, length of customer contracts, technological development and obsolescence, and other factors. The current and non-current portion of capitalized contract acquisition costs are included in other current assets and other assets on the condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the condensed consolidated statements of operations.
As of June 30, 2021, the current and non-current portions of capitalized contract acquisition costs were $3.1 million and $6.4 million, respectively. As of September 30, 2020, the current and non-current portions of capitalized contract acquisition costs were $2.3 million and $5.2 million, respectively. The Company amortized $0.8 million and $2.2 million of contract acquisition costs during the three and nine months ended June 30, 2021, respectively. The Company amortized $0.6 million and $1.9 million of contract acquisition costs during the three and nine months ended June 30, 2020, respectively.
    
For the three and nine months ended June 30, 2021 and 2020, there was no impairment related to capitalized contract acquisition costs.

8

Customer Deposits

Customer deposits primarily relate to payments received from customers which could be refundable pursuant to the terms of the related arrangement. These amounts are included in accrued liabilities on the condensed consolidated balance sheets. Customer deposits were immaterial as of June 30, 2021 and September 30, 2020.

Standard payment terms to customers generally range from thirty to ninety days; however, payment terms and conditions in our customer contracts may vary. In some cases, customers prepay for subscription and services in advance of the delivery; in other cases, payment is due as services are performed or in arrears following the delivery.

Performance Obligations
    
Remaining performance obligations represent non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of June 30, 2021, the aggregate amount of the transaction price allocated to performance obligations either unsatisfied or partially unsatisfied was $220.5 million, 48% of which we expect to recognize as revenue over the next 12 months and the remainder thereafter.


3.     Leases

The Company leases facilities under noncancelable operating leases with lease terms between three years and 10 years. Certain leases include options to extend or terminate the lease. The Company factored into the determination of lease payments the options that it is reasonably certain to exercise.

Operating lease costs were $1.4 million and $3.3 million for the three and nine months ended June 30, 2021, respectively, and $0.8 million and $2.5 million for the three and nine months ended June 30, 2020, respectively. Short-term lease costs, variable lease costs, and sublease income were immaterial for the three and nine months ended June 30, 2021 and 2020.

Cash flow information related to operating leases is as follows (in thousands):
Nine Months Ended June 30, 2021Nine Months Ended June 30, 2020
Cash paid for amounts included in the measurement of operating lease liabilities$2,022 $2,678 
Operating lease ROU assets obtained in exchange for new operating lease liabilities19,289 (375)

Operating lease ROU assets obtained in exchange for new operating lease liabilities during the nine months ended June 30, 2021 are primarily due to the Company’s headquarters lease and the lease for new office space in India that commenced during the period.

The weighted-average remaining lease term is 4.6 years and the weighted-average discount rate is 2.9% as of June 30, 2021.

Maturities of operating lease liabilities as of June 30, 2021 are as follows (in thousands):
Fiscal Year
Remaining fiscal 2021$762 
20225,073 
20234,961 
20244,730 
20254,361 
2026 and thereafter2,643 
Total operating lease payments22,530 
Less imputed interest1,483 
Total operating lease liabilities$21,047 

9


4.     Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, funds held for customers, accounts receivable, accounts payable, customer funds payable, debt and certain accrued liabilities. The Company regularly reviews its financial instruments portfolio to identify and evaluate such instruments that have indications of possible impairment. The Company estimates the fair value of its financial instruments when there is no readily available market data, which involves some level of management estimation and judgment and may not necessarily represent the amounts that could be realized in a current or future sale of these assets.
The table below sets forth the Company’s marketable securities which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
Reported as:
 Amortized CostUnrealized GainsUnrealized LossesFair ValueCash and Cash Equivalents
As of June 30, 2021    
Level 1:
Money market funds$116,049 $ $ $116,049 $116,049 
Total$116,049 $ $ $116,049 $116,049 
As of September 30, 2020
Level 1:
Money market funds$31,915 $ $ $31,915 $31,915 
US Treasury securities149,982   149,982 149,982 
Total $181,897 $ $ $181,897 $181,897 

The Company’s financial instruments not measured at fair value on a recurring basis include cash, funds held for customers, accounts receivable, accounts payable, customer funds payable, and certain accrued liabilities. These financial instruments are reflected in the financial statements at cost and approximate their fair value due to their short-term nature.

See Note 7 for the fair value measurement of the Company’s derivative contracts and Note 8 for the fair value measurement of the Company’s convertible senior notes.


5.     Acquisition, Goodwill, and Intangible Assets

Acquisition

On December 31, 2020, the Company acquired certain assets, properties and rights and certain liabilities and obligations from Deloitte & Touche LLP’s pricing and contracting solutions business for a contractual purchase price of $60.0 million subject to net working capital adjustments (the “Acquisition”). The acquired business operates primarily in the same markets as the Company’s existing operations. The reason for the Acquisition was to increase the Company’s addressable market and expand the opportunity to sell existing Model N products. This Acquisition has been accounted for as a business combination. The Company has included the results of the acquired business in its condensed consolidated financial statements since the date
10

of Acquisition. The Company incurred $2.5 million of acquisition-related expense during the nine months ended June 30, 2021, which was recorded as general and administrative expenses.
The total purchase consideration was $57.8 million reflecting a $2.2 million net working capital adjustment from the contractual purchase price. The Company paid the whole purchase consideration in cash during the nine months ended June 30, 2021.
The purchase price was allocated to assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. The following table sets forth the preliminary allocation of the purchase price in connection with the Acquisition (in thousands):
Acquisition Date Fair Value
Accounts receivable$3,844 
Property and equipment, net511 
Operating lease right-of-use assets2,764 
Goodwill26,382 
Intangible assets28,210 
Total assets acquired61,711 
Operating lease liabilities, current portion656 
Deferred revenue, current portion1,549 
Operating lease liabilities, less current portion1,657 
Total liabilities assumed3,862 
Total purchase price$57,849 
The fair value of the assets acquired and liabilities assumed is subject to change within the measurement period (up to one year from the Acquisition date), as the valuation is finalized and if new information becomes available. The Company does not expect the change to be material.
Intangible assets included customer relationships of $15.5 million, developed technology of $10.2 million, non-compete agreements of $1.6 million, and trade name of $0.9 million, which are amortized on a straight-line basis over 15 years, 6 years, 5 years, and 3 years, respectively, and over a weighted average period of 10.8 years. The Company applied significant judgment in determining the fair value of the intangible assets acquired, which involved the use of significant estimates and assumptions including customer attrition rate, royalty rate and technology migration curve. Goodwill is comprised of expected synergies for the combined operations and the assembled workforce acquired in the Acquisition. This goodwill is deductible for income tax purposes.
The Acquisition contributed $6.0 million to the Company’s revenues and increased operating loss, which approximated net loss, by $2.2 million during the quarter ended June 30, 2021. The Acquisition contributed $12.5 million to the Company’s revenues and increased operating loss, which approximated net loss, by $4.6 million since the date of Acquisition. The Company has not presented the supplemental pro forma information for revenue and earnings related to the Acquisition, as it is deemed impracticable to determine and disclose this information, due to the unavailability of the information provided to the Company by Deloitte & Touche LLP, management’s inability to reasonably estimate the amounts from the carve out business and differing fiscal year-ends.
11

Goodwill

The following table summarizes the changes in the carrying amount of goodwill (in thousands):
Balance at September 30, 2020$39,283 
Addition from Acquisition26,382 
Balance at June 30, 2021$65,665 

Intangible Assets

Intangible assets consisted of the following (in thousands):
 EstimatedAs of June 30, 2021
Useful Life
(in Years)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Intangible Assets:    
Customer relationships
3-15
$52,109 $(17,944)$34,165 
Developed technology
5-6
22,333 (11,244)11,089 
Non-compete agreements51,600 (160)1,440 
Trade name3850 (142)708 
Total $76,892 $(29,490)$47,402 
 EstimatedAs of September 30, 2020
Useful Life
(in Years)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Intangible Assets:    
Customer relationships
3-10
$36,599 $(14,758)$21,841 
Developed technology
5-6
12,083 (9,544)2,539 
Total $48,682 $(24,302)$24,380 
The Company recorded amortization expense related to acquired intangible assets of $2.0 million and $1.2 million for the three months ended June 30, 2021 and 2020, respectively, and $5.2 million and $3.6 million for the nine months ended June 30, 2021 and 2020, respectively.

Estimated future amortization expense for the intangible assets as of June 30, 2021 is as follows (in thousands):
Fiscal Year
Remaining fiscal 2021 $2,008 
20228,032 
20237,186 
20246,691 
20256,620 
2026 and thereafter16,865 
Total future amortization$47,402 


6.     Cash, Cash Equivalents, and Funds Held for Customers

As part of the acquisition of Deloitte & Touche LLP’s pricing and contracting solutions business, the Company now provides payment processing services to some customers whereby the Company has contractual obligations to remit funds to
12

various third parties on behalf of these customers. Funds received from these customers represent cash and cash equivalents and are reflected in the “Funds held for customers” line item on the condensed consolidated balance sheets.

The table below reconciles the cash and cash equivalents and funds held for customers as reported on the condensed consolidated balance sheets to the cash and cash equivalents on the condensed consolidated statements of cash flows (in thousands):
As of
June 30, 2021
As of
September 30, 2020
Cash and cash equivalents$153,766 $200,491 
Funds held for customers6,908  
Total cash and cash equivalents$160,674 $200,491 

7.     Derivative Instruments and Hedging

The Company uses foreign currency forward contracts to hedge a portion of the forecasted foreign currency-denominated expenses incurred in the normal course of business. These contracts are designated as cash flows hedges. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate movements. The Company does not use any of the derivative instruments for trading or speculative purposes. These contracts have maturities of 12 months or less. The Company records changes in the fair value of cash flow hedges in accumulated other comprehensive loss in the condensed consolidated balance sheets, until the forecasted transaction occurs, at which point, the related gain or loss on the cash flow hedge is reclassified to the financial statement line item to which the derivative relates. The amounts reclassified to expenses related to the hedged transactions were immaterial for the periods presented. The fair value of the outstanding non-deliverable foreign currency forward contracts was measured using Level 2 fair value inputs and was immaterial as of June 30, 2021 and September 30, 2020.

Notional Amounts of Derivative Contracts
Derivative transactions are measured in terms of the notional amount but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged but is used only as the basis on which the value of foreign exchange payments under these contracts are determined. The notional amounts of the outstanding foreign currency forward contracts designated as cash flow hedges were $6.3 million and $5.5 million as of June 30, 2021 and September 30, 2020, respectively.


8.     Convertible Senior Notes

In May 2020, the Company issued $172.5 million aggregate principal amount of 2.625% convertible senior notes in a private placement, including $22.5 million which represents the exercise in full of the initial purchasers’ option to purchase additional notes. The net proceeds from the issuance of the Notes was $166.4 million, net of initial purchasers’ discounts and debt issuance costs of $6.1 million. The Company used $40.0 million of the net proceeds to repay in full the debt outstanding under, and terminated the Credit Agreement dated May 4, 2018, as amended, by and among the Company, Wells Fargo, as administrative agent, and the lenders party thereto.

The Notes are senior, unsecured obligations of the Company and bear an interest rate of 2.625% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes mature on June 1, 2025 unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The Notes are convertible into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, at an initial conversion rate of 30.0044 shares of common stock per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $33.33 per share of common stock subject to adjustment, with a maximum conversion rate of 38.2555. The Company intends to settle the principal amount of the Notes with cash. Prior to the close of business on the scheduled trading day immediately preceding March 1, 2025, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount, only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading
13

day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
upon the occurrence of specified corporate events.

On or after March 1, 2025 and prior to the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount regardless of the foregoing conditions.

Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture) or in connection with any optional redemption are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change (as defined in the Indenture), holders of the Notes may require the Company to repurchase all or a portion of their Notes at a price equal to 100% of the principal amount of Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

The Company may not redeem the Notes prior to June 6, 2023. The Company may redeem for cash all or part of the Notes, at its option, on or after June 6, 2023 and on or before the 41st scheduled trading day immediately before the maturity date, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. No sinking fund is provided for the Notes.

During the three months ended June 30, 2021, the conditions allowing holders of the Notes to convert were not met. The Notes were classified as long-term debt on the condensed consolidated balance sheets as of June 30, 2021.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component of $115.3 million was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $57.2 million and was determined by deducting the fair value of the liability component from the principal amount of the Notes. The excess of the principal amount of the Notes over the carrying amount of the liability component is amortized to interest expense at an effective interest rate over the contractual terms of the Notes. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component were $4.1 million and are amortized to interest expense using the effective interest method over the contractual terms of the Notes. Issuance costs attributable to the equity component of $2.0 million were netted with the equity component in stockholders’ equity.

14

The net carrying amounts of the liability and equity components for the Notes were as follows (in thousands):
As of
June 30, 2021
As of
September 30, 2020
Liability component:
Principal amount$172,500 $172,500 
Unamortized discount(47,238)(54,147)
Unamortized issuance costs(3,538)(3,915)
Net carrying amount$121,724 $114,438 
Equity component, net of issuance costs$55,227 $55,227 

The following table sets forth the interest expense recognized related to the Notes (in thousands):
Three Months Ended June 30,Nine Months Ended June 30,
2021202020212020
Coupon interest expense$1,132 $491 $3,396 $491 
Amortization of debt discount2,368 925 6,909 925 
Amortization of debt issuance costs134 45 377 45 
Total interest expense related to the Notes$3,634 $1,461 $10,682 $1,461 
Effective interest rate of the liability component12.32 %12.32 %12.32 %12.32 %

The unamortized debt discount and debt issuance costs will be amortized over 47 months as of June 30, 2021.

As of June 30, 2021, the total estimated fair value of the Notes was approximately $220.9 million which includes the equity component. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market interest rates. The fair value of the Notes is considered a Level 2 measurement as they are not actively traded.

9.     Stockholders’ Equity

The following tables present the changes in the components of stockholders’ equity (in thousands):
Three Months Ended June 30, 2021
Common StockAdditional
Paid-In Capital
Accumulated
Other Comprehensive Loss
Accumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance at March 31, 202135,567 $5 $365,876 $(1,128)$(241,912)$122,841 
  Issuance of common stock upon exercise of stock options
2 — 24 — — 24 
Issuance of common stock upon release of restricted stock units
215 — — — — — 
  Stock-based compensation— — 6,363 — — 6,363 
  Other comprehensive loss— — — (103)— (103)
  Net loss— — — — (7,829)(7,829)
Balance at June 30, 202135,784 $5 $372,263 $(1,231)$(249,741)$121,296 
15

Three Months Ended June 30, 2020
Common StockAdditional
Paid-In Capital
Accumulated
Other Comprehensive Loss
Accumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance at March 31, 202034,249 $5 $284,099 $(1,846)$(220,036)$62,222 
  Issuance of common stock upon exercise of stock options
35 — 200 — — 200 
Issuance of common stock upon release of restricted stock units
263 — — — — — 
  Stock-based compensation— — 5,400 — — 5,400 
Equity component of convertible senior notes, net of issuance costs— — 55,233 — — 55,233 
  Other comprehensive loss— — — 219 — 219 
  Net loss— — — — (2,380)(2,380)
Balance at June 30, 202034,547 $5 $344,932 $(1,627)$(222,416)$120,894 
Nine Months Ended June 30, 2021
Common StockAdditional
Paid-In Capital
Accumulated
Other Comprehensive Loss
Accumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance at September 30, 202034,821 $5 $351,952 $(1,213)$(226,073)$124,671 
  Issuance of common stock upon exercise of stock options
6 — 55 — — 55 
  Issuance of common stock upon release of restricted stock units
891 — — — — — 
Issuance of common stock upon ESPP purchase
66 — 2,251 — — 2,251 
  Stock-based compensation— — 18,005 — — 18,005 
  Other comprehensive income— — — (18)— (18)
  Net loss— — — — (23,668)(23,668)
Balance at June 30, 202135,784 $5 $372,263 $(1,231)$(249,741)$121,296 
Nine Months Ended June 30, 2020
Common StockAdditional
Paid-In Capital
Accumulated
Other Comprehensive Loss
Accumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance at September 30, 201932,995 $5 $266,295 $(1,169)$(212,409)$52,722 
  Issuance of common stock upon exercise of stock options
65 — 493 — — 493 
  Issuance of common stock upon release of restricted stock units
1,402 — — — — — 
Issuance of common stock upon ESPP purchase
85 — 1,949 — — 1,949 
  Stock-based compensation— — 20,962 — — 20,962 
Equity component of convertible senior notes, net of issuance costs— — 55,233 — — 55,233 
  Other comprehensive loss— — — (458)— (458)
  Net loss— — — — (10,007)(10,007)
Balance at June 30, 202034,547 $5 $344,932 $(1,627)$(222,416)$120,894 
For the nine months ended June 30, 2020, additional paid-in capital included $3.7 million related to restricted stock unit (“RSU”) grants for the portion of the bonus recorded as stock-based compensation for the year ended September 30, 2019.

16

10.     Stock-based Compensation

As of June 30, 2021, the Company had approximately 3.6 million shares available for future stock awards under its equity plans and any additional releases resulting from an over-achievement relating to performance-based restricted stock units.

The following table summarizes our RSU activity which includes performance-based RSUs under all equity plans for the nine months ended June 30, 2021:
Restricted 
Stock Units
Outstanding
(in thousands)
Weighted
Average
Grant Date
Fair Value
Balance at September 30, 20201,957 $22.43 
Granted1,142 35.96 
Released(890)22.47 
Forfeited(245)27.21 
Balance at June 30, 20211,964 $29.69 

Stock-based compensation recorded in the condensed consolidated statements of operations is as follows (in thousands):
 Three Months Ended June 30,Nine Months Ended June 30,
 2021202020212020
Cost of revenues    
Subscription $1,175 $412 $2,544 $1,429 
Professional services1,260 528 2,916 1,685 
Total stock-based compensation in cost of revenues2,435 940 5,460 3,114 
Operating expenses
Research and development1,776 1,074 4,520 3,743 
Sales and marketing2,091 1,527 5,611 4,589 
General and administrative2,638 1,859 6,259 5,786 
Total stock-based compensation in operating expenses6,505 4,460 16,390 14,118 
Total stock-based compensation$8,940 $5,400 $21,850 $17,232 
For the three and nine months ended June 30, 2021, the total stock-based compensation included $2.6 million and $3.8 million related to bonus expense, respectively, which was recorded in the accrued employee compensation line item in the Condensed Consolidated Balance Sheets.

11.     Income Taxes

The Company recorded income tax provisions of $0.4 million and $0.2 million, representing effective income tax rates of (4.7)% and (8.3)% for the three months ended June 30, 2021 and 2020, respectively; and $0.8 million and $0.5 million, representing effective income tax rates of (3.7)% and (5.4)% for the nine months ended June 30, 2021 and 2020, respectively. The income tax provision for the three and nine months ended June 30, 2021 was primarily related to foreign taxes on the Company’s profitable foreign operations, foreign withholding taxes on dividends, and deferred taxes on goodwill resulting from the Acquisition. The income tax provision for the three months ended June 30, 2020 was primarily related to foreign taxes on the Company’s profitable foreign operations and state minimum taxes. The income tax provision for the nine months ended June 30, 2020 was primarily related to foreign taxes on the Company’s profitable foreign operations and foreign withholding taxes on dividends partially offset by a discrete tax benefit for a true-up in federal income tax payable.

The Company elected to partially reinvest foreign earnings in certain foreign jurisdictions and expects to repatriate future foreign earnings in certain foreign jurisdictions over time. As a result, the Company will record a deferred tax liability for the additional non-U.S. taxes that are expected to be incurred related to the repatriation of these earnings. During the nine months ended June 30, 2021, the Company repatriated $1.5 million of foreign subsidiary earnings to the U.S. in the form of cash and
17

paid foreign withholding taxes of $0.2 million. During the nine months ended June 30, 2020, the Company repatriated $1.0 million of foreign subsidiary earnings to the U.S. in the form of cash and paid foreign withholding taxes of $0.2 million.

The Company elected to record GILTI as a period cost. The Company realized no benefit for current period losses due to maintaining a full valuation allowance against the U.S. net deferred tax assets.


12.     Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):
 Three Months Ended June 30,Nine Months Ended June 30,
 2021202020212020
Numerator    
Basic and diluted    
Net loss attributable to common stockholders$(7,829)$(2,380)$(23,668)$(10,007)
Denominator
Basic and diluted
Weighted average shares used in computing net loss per share attributable to common stockholders
35,679 34,411 35,305 33,781 
Net loss per share attributable to common stockholders:
Basic and diluted$(0.22)$(0.07)$(0.67)$(0.30)
Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would have been anti-dilutive are as follows (in thousands):
 As of June 30,
 20212020
Stock options28 35 
Performance-based RSUs and RSUs1,964 2,186 
Shares issuable pursuant to the employee stock purchase plan61 66 
Convertible senior notes5,176 5,176 
Since the Company expects to settle the principal amount of its Notes in cash and any excess in cash or shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company’s common stock for a given period exceeds the conversion price of $33.33 per share for the Notes.

13.     Litigation and Contingencies

Legal Proceedings
The Company is not currently a party to any pending material legal proceedings. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on the Company due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.


14.     Geographic Information

The Company has one operating segment with one business activity — developing and monetizing revenue management solutions.

18

Revenues

The Company disaggregates the revenues by geographic regions based on the bill to location of its customers. Revenues from customers outside of the United States were 6% and 8% of total revenues for the three months ended June 30, 2021 and 2020, respectively, and 7% and 9% of total revenues for the nine months ended June 30, 2021 and 2020, respectively.

Long-Lived Assets

The following table sets forth the Company’s property and equipment, net, by geographic region (in thousands):
As of
June 30, 2021
As of
September 30, 2020
United States$1,215