Model N, Inc. (MODN) Q1 2024 Earnings Call Transcript
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Overview
Model N shows strong financial metrics, with impressive growth in SaaS ARR and free cash flow. The company's strategic wins, such as new logos and customer expansions, bolster future prospects. Despite minor challenges in professional services, optimistic guidance and significant cash reserves support a positive outlook. The market cap indicates a likely positive reaction.
Key Financial Performance
Total Revenue $63.5 million, up 7% year-over-year, driven by upside on both subscription and professional services revenue.
Subscription Revenue $47.7 million, up 8% year-over-year, exceeding guidance.
Professional Services Revenue $15.8 million, up 6% year-over-year, also above guidance.
Adjusted EBITDA $9.9 million, representing a margin of 15.5%, above the high end of guidance.
Non-GAAP Earnings Per Share $0.28, slightly below guidance due to variance on below the line items.
SaaS ARR $134.8 million, up 16% year-over-year.
Free Cash Flow $43.5 million for the trailing 12 months, up 172% year-over-year.
Total RPO $349 million, up 3% year-over-year.
Current Portion of RPO $160 million, up 11% year-over-year.
Cash and Equivalents $303 million, up $2 million sequentially from September.
Accounts Receivable $83 million for Q1, reflecting a record quarter of invoicing.
Deferred Revenue $74 million for Q1, also due to a record quarter of invoicing.
Operating Highlights
New Product Launch: Model N's new product, Engage, was implemented by Novartis to enhance operational excellence and user experience. Global Launch Excellence module was selected by Apellis Pharmaceuticals to improve their global pricing management. State Price Transparency Management was released to help United Therapeutics comply with state regulations. Price management for High Tech was introduced to manage price execution across channels.
Market Expansion: Model N signed a significant contract with Bayer Pharmaceuticals, a top 20 global pharma company. New logo wins included Taiwan Semiconductor, expanding Model N's presence in the High Tech sector. Moderna expanded their business services consumption to support their growing operations.
Operational Efficiency: Model N generated over $20 million in incremental cash flow from operations in Q1. Adjusted EBITDA was $9.9 million, representing a margin of 15.5%. Free cash flow increased to $43.5 million for the trailing 12 months, up 172% year-over-year.
Strategic Shift: Model N is navigating the final stages of its business model transformation while driving growth. Focus on advanced analytics and AI to address customer priorities in process efficiency and cost savings.
Risk or Challenges
Competitive Pressures: Model N faced tough comparables in the first few quarters of fiscal 2024 compared to last year's record-setting SaaS metrics, indicating competitive pressures in maintaining growth.
Regulatory Issues: Pharmaceutical executives do not see the pace of regulatory change slowing down, which poses ongoing challenges for compliance and operational adjustments.
Supply Chain Challenges: Supply chain disruption emerged as a top obstacle across all industries, indicating potential risks in operational efficiency and product delivery.
Economic Factors: Executives are increasingly looking to advanced analytics and AI to achieve process efficiency and cost savings, reflecting economic pressures to optimize operations.
Business Model Transition: Model N is still navigating a business model transition, which may lead to fluctuations in revenue and operational performance as they adjust to new SaaS metrics.
Guidance & Outlook
SaaS ARR Growth: Q1 SaaS ARR grew by 16% year-over-year, with SaaS net dollar retention at 115%.
New Logo Wins: Signed a significant contract with Bayer Pharmaceuticals, including a full suite of cloud offerings.
Product Innovation: Launched new products like Model N Engage and Global Launch Excellence to enhance customer operations.
Customer Expansion: Moderna and United Therapeutics expanded their business services with Model N.
High Tech Segment Growth: Secured new logos including Taiwan Semiconductor, indicating growth in the High Tech segment.
Total Revenue Guidance FY 2024: Expected total revenue in the range of $260.5 million to $263.5 million.
Subscription Revenue Guidance FY 2024: Expected subscription revenue in the range of $193.5 million to $195.5 million.
Professional Services Revenue Guidance FY 2024: Expected professional services revenue in the range of $67 million to $68 million.
Adjusted EBITDA Guidance FY 2024: Expected adjusted EBITDA in the range of $48 million to $51 million.
Non-GAAP EPS Guidance FY 2024: Expected non-GAAP EPS between $1.25 and $1.32 per share.
Q2 Total Revenue Guidance: Expected total revenue in the range of $63.5 million to $64.5 million.
Q2 Subscription Revenue Guidance: Expected subscription revenue in the range of $48.5 million to $49 million.
Q2 Professional Services Revenue Guidance: Expected professional services revenue in the range of $15 million to $15.5 million.
Q2 Adjusted EBITDA Guidance: Expected adjusted EBITDA in the range of $9 million to $10 million.
Q2 Non-GAAP EPS Guidance: Expected non-GAAP EPS in the range of $0.24 to $0.27 per share.
Shareholder Return Plan
Free Cash Flow: $43.5 million for the trailing 12 months ending Q1, up 172% year-over-year.
Total Revenue Guidance for Fiscal 2024: Expected to be in the range of $260.5 million to $263.5 million.
Subscription Revenue Guidance for Fiscal 2024: Expected to be in the range of $193.5 million to $195.5 million.
Adjusted EBITDA Guidance for Fiscal 2024: Expected to be in the range of $48 million to $51 million.
Non-GAAP EPS Guidance for Fiscal 2024: Expected to be between $1.25 and $1.32 per share.
Key Q&A
Earnings Word Cloud
MODN Transcript
Model N shows strong financial metrics, with impressive growth in SaaS ARR and free cash flow. The company's strategic wins, such as new logos and customer expansions, bolster future prospects. Despite minor challenges in professional services, optimistic guidance and significant cash reserves support a positive outlook. The market cap indicates a likely positive reaction.
MODN Report
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