Model N Announces Third Quarter of Fiscal Year 2018 Financial

Model N Announces Third Quarter of Fiscal Year 2018 Financial Results


Model N Inc. Condensed Consolidated Balance Sheets (in thousands) (unaudited)

	As of June 30, 2018			As of September 30, 2017
Assets
Current assets:
Cash and cash equivalents	$	57,645		$	57,558
Accounts receivable, net		31,707			24,784
Prepaid expenses		3,307			3,733
Other current assets		405			1,013
Total current assets		93,064			87,088
Property and equipment, net		2,496			4,611
Goodwill		39,283			39,283
Intangible assets, net		35,977			40,156
Other assets		996			798
Total assets	$	171,816		$	171,936
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,383		$	3,002
Accrued employee compensation		12,376			14,996
Accrued liabilities		4,041			4,979
Deferred revenue, current portion		54,902			49,186
Long term debt, current portion		5,995			4,753
Total current liabilities		78,697			76,916
Long-term liabilities:
Long term debt		52,846			52,452
Other long-term liabilities		1,651			1,307
Total long-term liabilities		54,497			53,759
Total liabilities		133,194			130,675
Stockholders' equity:
Common Stock		5			4
Preferred Stock		—			—
Additional paid-in capital		239,372			217,052
Accumulated other comprehensive loss		(874	)		(502	)
Accumulated deficit		(199,881	)		(175,293	)
Total stockholders' equity		38,622			41,261
Total liabilities and stockholders' equity	$	171,816		$	171,936


Model N Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited)

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Revenues:
SaaS and maintenance	$	35,623		$	28,530		$	100,943		$	78,427
License and implementation		3,994			5,714			16,975			17,137
Total revenues		39,617			34,244			117,918			95,564
Cost of Revenues:
SaaS and maintenance		14,599			12,439			40,489			34,527
License and implementation		1,846			3,333			10,018			11,106
Total cost of revenues		16,445			15,772			50,507			45,633
Gross profit		23,172			18,472			67,411			49,931
Operating Expenses:
Research and development		7,746			8,393			24,861			23,302
Sales and marketing		9,338			10,739			26,845			31,081
General and administrative		17,044			8,096			33,099			26,949
Total operating expenses		34,128			27,228			84,805			81,332
Loss from operations		(10,956	)		(8,756	)		(17,394	)		(31,401	)
Interest expense (income), net		4,478			1,442			7,350			2,789
Other expenses (income), net		(344	)		3			(306	)		77
Loss before income taxes		(15,090	)		(10,201	)		(24,438	)		(34,267	)
(Benefit) provision for income taxes		345			234			150			(3,742	)
Net loss	$	(15,435	)	$	(10,435	)	$	(24,588	)	$	(30,525	)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.50	)	$	(0.36	)		(0.82	)	$	(1.07	)
Weighted average number of shares used in computing net loss per share attributable to common stockholders:
Basic and diluted		30,749			28,936			30,042			28,464


Model N Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

	Nine Months Ended June 30,
	2018			2017
Cash Flows From Operating Activities:
Net loss	$	(24,588	)	$	(30,525	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		6,410			5,866
Stock-based compensation		19,312			6,935
Amortization of debt discount and issuance cost		686			502
Deferred income taxes		(581	)		(4,019	)
Other non-cash charges		(30	)		239
Loss on debt extinguishment		3,142			—
Changes in assets and liabilities, net of acquisition:
Accounts receivable		(6,833	)		(7,561	)
Prepaid expenses and other assets		(102	)		2,592
Deferred cost of implementation services		488			1,289
Accounts payable		(1,752	)		(854	)
Accrued employee compensation		(2,541	)		1,482
Other accrued and long-term liabilities		(639	)		(1,085	)
Deferred revenue		6,386			8,875
Net cash used in operating activities		(642	)		(16,264	)
Cash Flows From Investing Activities:
Purchases of property and equipment		(165	)		(290	)
Acquisition of businesses, net of cash acquired		—			(47,773	)
Capitalization of software development costs		—			(335	)
Net cash used in investing activities		(165	)		(48,398	)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options and issuance of employee stock purchase plan		3,008			2,457
Proceeds from term loan		49,588			48,686
Debt issuance costs		(145	)		(806	)
Principal payments on loan		(50,000	)		—
Early payment penalty		(1,500	)		—
Net cash provided by financing activities		951			50,337
Effect of exchange rate changes on cash and cash equivalents		(57	)		7
Net decrease in cash and cash equivalents		87			(14,318	)
Cash and cash equivalents
Beginning of period		57,558			66,149
End of period	$	57,645		$	51,831


Model N Inc. Reconciliation of GAAP to Non-GAAP Operating Results (in thousands, except per share amounts) (unaudited)

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Reconciliation from GAAP net loss to adjusted EBITDA:
GAAP net loss:	$	(15,435	)	$	(10,435	)	$	(24,588	)	$	(30,525	)
Reversal of non-GAAP items:
Stock-based compensation expense		12,030			2,487			19,312			6,935
Depreciation and amortization		1,983			2,373			6,410			5,866
Deferred revenue adjustment		—			1,710			627			3,810
Acquisition and integration related costs		—			711			—			5,476
Interest expense (income), net		4,478			1,442			7,350			2,789
Other expenses (income), net		(344	)		3			(306	)		77
(Benefit) provision for income taxes		345			234			150			(3,742	)
Adjusted EBITDA	$	3,057		$	(1,475	)	$	8,955		$	(9,314	)

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Reconciliation from GAAP revenue to revenue before deferred revenue adjustment:
GAAP revenue:	$	39,617		$	34,244		$	117,918		$	95,564
Deferred revenue adjustment (d)		—			1,710			627			3,810
Revenue before deferred revenue adjustment	$	39,617		$	35,954		$	118,545		$	99,374

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Reconciliation from GAAP gross profit to non-GAAP gross profit:
GAAP gross profit:	$	23,172		$	18,472		$	67,411		$	49,931
Reversal of non-GAAP expenses:
Stock-based compensation (a)		699			586			1,972			1,482
Amortization of intangible assets (b)		476			476			1,428			1,218
Acquisition and integration related expenses (c)		—			196			—			419
Deferred revenue adjustment (d)		—			1,710			627			3,810
Non-GAAP gross profit	$	24,347		$	21,440		$	71,438		$	56,860
Percentage of revenue before deferred revenue adjustment		61.5	%		59.6	%		60.3	%		57.2	%

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Reconciliation from GAAP loss from operations to non-GAAP loss from operations:
GAAP net loss from operations:	$	(10,956	)	$	(8,756	)	$	(17,394	)	$	(31,401	)
Reversal of non-GAAP expenses:
Stock-based compensation (a)		12,030			2,487			19,312			6,935
Amortization of intangible assets (b)		1,381			1,418			4,181			3,211
Acquisition and integration related expenses (c)		—			711			—			5,476
Deferred revenue adjustment (d)		—			1,710			627			3,810
Non-GAAP income (loss) from operations	$	2,455		$	(2,430	)	$	6,726		$	(11,969	)

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Numerator:
Reconciliation between GAAP and non-GAAP net loss:
GAAP net loss:	$	(15,435	)	$	(10,435	)	$	(24,588	)	$	(30,525	)
Reversal of non-GAAP expenses:
Stock-based compensation (a)		12,030			2,487			19,312			6,935
Amortization of intangible assets (b)		1,381			1,418			4,181			3,211
Acquisition and integration related expenses (c)		—			711			—			5,476
Deferred revenue adjustment (d)		—			1,710			627			3,810
Deferred tax valuation allowances (f)		—			—			—			(4,165	)
Non-GAAP net income (loss) attributable to Model N Inc. common stockholders	$	(2,024	)	$	(4,109	)	$	(468	)	$	(15,258	)
Denominator:
Reconciliation between GAAP and non-GAAP net loss per share attributable to Model N Inc. common stockholders:
Weighted average number of shares used in computing GAAP dilutive net loss per share		30,749			28,936			30,042			28,464
GAAP dilutive net loss per share attributable to Model N Inc. common stockholders	$	(0.50	)	$	(0.36	)	$	(0.82	)	$	(1.07	)
Non-GAAP net income (loss) per share attributable to Model N Inc. common stockholders		(0.07	)		(0.14	)		(0.02	)		(0.54	)

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Amortization of intangibles assets recorded in the statement of operations:
Cost of revenues:
SaaS and maintenance	$	476		$	476			1,428			1,218
License and implementation		—			—
Total amortization of intangibles assets in cost of revenue (b)		476			476			1,428			1,218
Operating expenses:
Research and development		—			—			—			—
Sales and marketing		905			942			2,753			1,993
General and administrative		—			—			—			—
Total amortization of intangibles assets in operating expense (b)		905			942			2,753			1,993
Total amortization of intangibles assets (b)	$	1,381		$	1,418		$	4,181		$	3,211

	Three Months Ended June 30,						Nine months ended June 30,
	2018			2017			2018			2017
Stock-based compensation recorded in the statement of operations:
Cost of revenues:
SaaS and maintenance	$	326		$	290			961			742
License and implementation		373			296			1,011			740
Total stock-based compensation in cost of revenue (a)		699			586			1,972			1,482
Operating expenses:
Research and development		744			512			2,144			1,273
Sales and marketing		986			835			2,517			1,744
General and administrative		9,601			554			12,679			2,436
Total stock-based compensation in operating expense (a)		11,331			1,901			17,340			5,453
Total stock-based compensation (a)	$	12,030		$	2,487		$	19,312		$	6,935

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