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Model N Announces Third Quarter of Fiscal Year 2018 Financial Results

August 7, 2018

SAN MATEO, Calif.--(BUSINESS WIRE)--Aug 7, 2018--Model N, Inc., (NYSE: MODN), the leading provider of revenue management cloud solutions for the pharmaceutical, medical device, high tech, manufacturing and semiconductor industries, today announced financial results for the third quarter, which ended June 30, 2018.

“Model N exceeded its revenue and profitability guidance for the third quarter of fiscal 2018. The strong Q3 performance puts us on track to deliver record revenue, profitability and cash flow for the full year,” said Jason Blessing, Chief Executive Officer of Model N. “Over the last 90 days, I’ve enjoyed meeting with our customers, employees and investors and thank them all for their warm welcome. I’m also very proud of our blue-chip customer portfolio and the mission critical role our cloud solutions play in their businesses. My discussions also reinforce my belief that Model N has a great opportunity ahead of us.”

Third Quarter 2018 Financial Highlights:

Revenues: SaaS and maintenance revenues were $35.6 million compared to $28.5 million for the third quarter of fiscal 2017. Total revenues were $39.6 million compared to $34.2 million for the third quarter of fiscal 2017. Gross Profit: Gross profit was $23.2 million compared to $18.5 million for the third quarter of fiscal 2017. Gross margins were 58% compared to 54% for the third quarter of fiscal 2017. Non-GAAP gross profit was $24.3 million compared to $21.4 million for the third quarter of fiscal 2017. Non-GAAP gross margins were 62% compared to 60% for the third quarter of fiscal 2017. (Loss) income from operations: GAAP loss from operations was $(11.0) million compared to a GAAP loss from operations of $(8.8) million for the third quarter of fiscal 2017. Non-GAAP income from operations was $2.5 million compared to a Non-GAAP loss from operations of $(2.4) million for the third quarter of fiscal 2017. Net loss: GAAP net loss was $(15.4) million, which includes $8.5 million of stock-based compensation expense related to the resignation of our former CEO and Chairman of the Board and $3.1 million of cash and non-cash expense related to the debt re-financing, compared to a net loss of $(10.4) million for the third quarter of fiscal 2017. GAAP basic and diluted net loss per share attributable to common stockholders was $(0.50) based upon weighted average shares outstanding of 30.7 million, as compared to net loss per share of $(0.36) for the third quarter of fiscal 2017 based upon weighted average shares outstanding of 28.9 million. Non-GAAP net income (loss): Non-GAAP net loss was $(2.0) million, which includes $3.1 million of cash and non-cash expense related to the debt re-financing, as compared to a Non-GAAP net loss of $(4.1) million for the third quarter of fiscal 2017. Non-GAAP net loss per share was $(0.07) based upon weighted average shares outstanding of 30.7 million, as compared to Non-GAAP net loss per share of $(0.14) for the third quarter of fiscal 2017 based upon weighted average shares outstanding of 28.9 million. Adjusted EBITDA: Adjusted EBITDA was $3.1 million compared to $(1.5) million for the third quarter of fiscal 2017.

Use of Non-GAAP Financial Measures

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

Business Highlights:

Nevro Corp, a high growth medical device company with a treatment for chronic back and leg pain, subscribed to Model N’s Provider Management, part of the Model N Revenue Cloud for MedTech. This customer win highlights that Model N Revenue Cloud is a very effective platform for both large companies as well as emerging companies, enabling Model N to serve all segments across life sciences. BioMarin, Diodes, Eli Lilly, CSL Behring, Fresenius Kabi, ICU Canada, Johnson & Johnson, EMD Serono and Mallinckrodt, among others, recently completed implementation projects and went live with Revenue Cloud. Model N hosted a successful Life Sciences Commercial and Pricing Innovation Forum which focused on understanding how global pricing trends are affecting the life sciences industry. The conference covered a variety of topics including global tender management, country variations in pricing, outcome-based agreements, rebates and compliance. Model N delivered the summer release of Revenue Cloud. Our SaaS customers will immediately benefit from new innovation to manage complex use cases for pricing, quoting, and rebates including increasingly complex global price management, updates to support new government regulations, as well as several user experience enhancements.

Guidance:

As of August 7, 2018, we are providing guidance for the fourth quarter of fiscal 2018 and the full fiscal year ending September 30, 2018.

Quarterly Results Conference Call

Model N will host a conference call today at 2:00 PM Pacific Time (5:00 PM Eastern Time) to review the company’s financial results for the third quarter, which ended June 30, 2018. The conference call can be accessed by dialing (877) 407-4018 from the United States or (201) 689-8471 internationally with reference to the company name and conference title, and a live webcast and replay of the conference call can be accessed from the investor relations page of Model N’s website at investor.modeln.com. Following the completion of the call through 11:59 p.m. ET on August 14, 2018, a telephone replay will be available by dialing (844) 512-2921 from the United States or (412) 317-6671 internationally with recording access code 13681148.

About Model N

Model N is the leader in revenue management solutions. Driving mission critical business processes such as configure, price and quote (CPQ), contract and rebate management, business intelligence, and regulatory compliance, Model N solutions transform the revenue lifecycle from a series of disjointed operations into a strategic end-to-end process. With deep industry expertise, Model N supports the complex business needs of the world’s leading brands in pharmaceutical, medical device, high tech, manufacturing and semiconductors across more than 120 countries, including Pfizer, AstraZeneca, Sanofi, Gilead, Abbott, Stryker, AMD, Micron, Seagate, STMicroelectronics, NXP, Sesotec, and Southern States. For more information, visit www.modeln.com.

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

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding Model N’s fourth quarter and full year fiscal year 2018 revenue, , and other financial results as well as outlook for fiscal year 2018 and future prospects. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) delays in closing customer contracts; (ii) our ability to improve and sustain our sales execution; (iii) the timing of new orders and the associated revenue recognition; (iv) adverse changes in general economic or market conditions; (v) delays or reductions in information technology spending and resulting variability in customer orders from quarter to quarter; (vi) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by our competitors; (vii) our ability to manage our growth effectively; and (viii) acceptance of our applications and services by customers; (ix) success of new products; (x) the risk that the strategic initiatives that we may pursue will not result in significant future revenues; (xi) changes in health care regulation and policy and tax in the United States and worldwide; and (xii) our ability to retain customers, and (xiii) acquisition-related risks from our acquisition of Revitas. Further information on risks that could affect Model N’s results is included in our filings with the Securities and Exchange Commission (“SEC”), including our most recent quarterly report on Form 10-Q and our annual report on Form 10-K for the fiscal year ended September 30, 2017, and any current reports on Form 8-K that we may file from time to time. Should any of these risks or uncertainties materialize, actual results could differ materially from expectations. Model N assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

Non-GAAP Financial Measures

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

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

Our reported results include certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net loss, non-GAAP net (loss) income per share, and adjusted EBITDA. Non-GAAP gross profit excludes stock-based compensation expense, acquisition & integration related expenses, deferred revenue adjustment and amortization of intangible assets. Non-GAAP loss from operations and non-GAAP net loss exclude stock-based compensation expense, amortization of intangible assets, and acquisition & integration related expenses, deferred revenue adjustment and valuation allowance resulting from Revitas acquisition as they are often excluded by other companies to help investors understand the operational performance of their business and, in the case of stock-based compensation, can be difficult to predict and therefore we have not provided a reconciliation of forecasted Non-GAAP results with GAAP. In addition, stock-based compensation expense varies from period to period and company to company due to such things as differing valuation methodologies and changes in stock price. Adjusted EBITDA is defined as net loss, adjusted depreciation and amortization, stock-based compensation expense, acquisition & integration related expenses, deferred revenue adjustment, interest (income) expense, net, and other (income) expenses, net, and provision (benefit) for income taxes. Reconciliation tables are provided in this press release.

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