Model N Announces Second Quarter Fiscal 2013 Financial Results

  Model N Announces Second Quarter Fiscal 2013 Financial Results

         Q2 revenues of $24.6 million, a 21% year-over-year increase

Raised over $100 million in growth capital through IPO listing on the New York
                                Stock Exchange

Business Wire

REDWOOD CITY, Calif. -- May 07, 2013

Model N, Inc., (NYSE: MODN), the leader in Revenue Management solutions for
the life science and technology industries, today announced financial results
for the second quarter of fiscal 2013, which ended March 31, 2013.

“We are pleased with our second quarter results, which exceeded our
expectations on both revenue and profitability,” said Zack Rinat, Founder,
Chairman, and Chief Executive Officer at Model N. “We are still in the early
stages of a major new market opportunity as companies adopt modern software
solutions to address their Revenue Management challenges, replacing outdated
custom solutions and manual business processes along the way. Model N has
emerged as the market leader as a result of our comprehensive Revenue
Management platform, vertical focus and demonstrated history of delivering
business value.”

“We are pleased to have completed our IPO in March. The increased market
awareness and financial resources from this event will help us to execute the
company’s growth plans and capitalize on our growing, multi-billion dollar
market opportunity,” added Rinat.

Second Quarter Fiscal 2013 Financial Highlights:

  *Total Revenues: Total revenues were $24.6 million, a year-over-year
    increase of 21% compared to $20.2 million for the second quarter of fiscal
    2012.
  *Gross Profit: Gross profit was $13.0 million, compared to $9.6 million for
    the second quarter of fiscal 2012. Non-GAAP gross profit was $13.3 million
    compared to $11.1 million for the second quarter of fiscal 2012.
  *Income (Loss) from operations: GAAP loss from operations was $1.0 million,
    compared to $3.7 million for the second quarter of fiscal 2012. Non-GAAP
    income from operations was slightly above breakeven, compared to a loss
    from operations of $0.8 million for the second quarter of fiscal 2012.
  *Net loss: GAAP net loss was $1.9 million, compared to $4.2 million for the
    second quarter of fiscal 2012. GAAP net loss per share was $0.19 based
    upon weighted average shares outstanding of 10.1 million, as compared to
    $0.54 for the second quarter of fiscal 2012 based upon weighted average
    shares outstanding of 7.7 million.
  *Non-GAAP net loss: Non-GAAP net loss was $0.2 million, as compared to $1.1
    million for the second quarter of fiscal 2012. Non-GAAP net loss per share
    was $0.01 based upon weighted average shares outstanding of 16.4 million,
    as compared to $0.07 for the second quarter of fiscal 2012 based upon
    weighted average shares outstanding of 15.0 million.
  *Adjusted EBITDA: Adjusted EBITDA was $0.5 million, compared to ($0.4)
    million for the second quarter of fiscal 2012.

Use of Non-GAAP Financial Measures

A reconciliation of GAAP to non-GAAP financial measures has been provided in
the financial statement tables included in this press release. An explanation
of these measures, including the reasons management uses each measure, is also
included below under the heading "Non-GAAP Financial Measures."

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 second quarter
of fiscal 2013, which ended March 31, 2013. To access the call, please dial
(888) 503-8169 in the U.S. or (719) 325-2454 internationally. Passcode is
4807849. A live webcast of the conference will be accessible from Model N’s
website at: http://investor.modeln.com. Following the completion of the call
through 11:59 p.m. ET on May 14, 2013, a recording will be available for
replay at: http://investor.modeln.com and a telephone replay will be available
by dialing (877) 870-5176 in the U.S. or (858) 384-5517 internationally with
recording access code 4807849.

About Model N

Model N is the leader in Revenue Management solutions. Model N helps our
customers dramatically improve pricing and contracting, rebates and
incentives, and sales and marketing performance analysis to increase their
revenue. Model N drives improved pricing, margin, and revenue performance for
our customers through a powerful combination of best practices, highly
configurable software applications, comprehensive services, and actionable
analytics. Model N leverages its deep industry expertise to support the unique
business needs of Life Sciences and Technology manufacturers in more than 50
countries. Global Customers include: Allergan, Amgen, Atmel, Boston
Scientific, Bristol-Myers Squibb, Dell, Johnson & Johnson, Linear Technology,
Merck, Marvell, Maxim, Micron, Nokia, Novartis, Novo Nordisk, ON
Semiconductor, STMicroelectronics, and Watson Pharmaceuticals. Learn more at:
http://www.modeln.com. Model N is traded on the New York Stock Exchange under
the symbol MODN.

Forward-Looking Statements

This press release contains forward-looking statements including, among other
things, statements regarding Model N’s growth plans. 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) adverse
changes in general economic or market conditions; (ii) delays or reductions in
information technology spending and resulting variability in customer orders
from quarter to quarter; (iii) competitive factors, including but not limited
to pricing pressures, industry consolidation, entry of new competitors and new
applications and marketing initiatives by our competitors; (iv) our ability to
manage our growth effectively; and (v) acceptance of our applications and
services by customers. Further information on risks that could affect Model
N’s results is included in our filings with the Securities and Exchange
Commission, including our final prospectus, our quarterly report on Form 10-Q
for the quarter ended March 31, 2013, and 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 operating income (loss), non-GAAP net income (loss), weighted-average
shares outstanding, non-GAAP net income (loss) per share, and adjusted EBITDA.
Non-GAAP operating income (loss) and non-GAAP net income (loss) exclude
expenses related to stock-based compensation expense, LeapFrogRX compensation
charges, amortization of intangible assets, and changes in fair value of
preferred stock warrant liability 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. 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
income (loss), adjusted for LeapFrogRX compensation charges, depreciation and
amortization, stock-based compensation expense, interest and other expense,
net, and provision for income taxes. Reconciliation tables are provided in
this press release.

Model N Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
                                            March 31,      September 30,
                                               2013              2012
Assets
Current assets:
Cash and cash equivalents                      $ 109,024         $  15,768
Short-term investments                           63                 -
Accounts receivable, net of allowances
of $98 and $55 as of March 31, 2013 and          15,101             12,468
September 30, 2012, respectively
Deferred cost of implementation                  1,116              1,077
services, current portion
Prepaid expenses                                 1,621              2,246
Other current assets                            327              552      
Total current assets                             127,252            32,111
Property and equipment, net                      5,966              4,590
Goodwill                                         1,509              1,509
Other intangible assets, net                     1,083              1,248
Other assets                                    711              1,140    
Total assets                                   $ 136,521        $  40,598   
Liabilities and stockholders' equity
Current liabilities:
Accounts payable                               $ 539             $  196
Accrued employee compensation                    8,045              7,650
Accrued liabilities                              4,670              4,432
Deferred revenue, current portion                28,118             29,362
Capital lease obligations, current               519                555
portion
Loan obligations, current portion               2,500            2,500    
Total current liabilities                        44,391             44,695
Long-term liabilities:
Deferred revenue, net of current portion         2,398              2,289
Capital lease obligations, net of                87                 349
current portion
Loan obligations, net of current portion         1,397              2,627
Other long-term liabilities                     688              1,125    
Total long-term liabilities                     4,570            6,390    
Total liabilities                               48,961           51,085   
Convertible preferred stock:                     -                  41,776
Stockholders' equity:
Common stock                                     3                  1
Preferred stock                                  -                  -
Additional paid-in capital                       152,099            9,045
Accumulated other comprehensive loss             (144    )          (120     )
Accumulated deficit                             (64,398 )         (61,189  )
Total equity                                    87,560           (52,263  )
Total liabilities, convertible preferred       $ 136,521        $  40,598   
stock and stockholders' equity
                                                                             
                                                                             

Model N Inc.
Condensed Consolidated Statements of Operations
(dollars and shares in thousands, except per share amounts)
(unaudited)
                    Three months ended          Six months ended
                       March 31,    March 31,     March 31,    March 31,
                       2013           2012           2013           2012
Revenue:
License and            $ 14,481       $ 11,659       $ 26,943       $ 23,024
implementation
SaaS and                10,078       8,581        19,957       15,273 
maintenance
Total revenue            24,559         20,240         46,900         38,297
Cost of revenue:
License and              6,800          5,515          12,360         10,543
implementation
SaaS and                4,781        5,168        9,304        7,664  
maintenance
Total cost of           11,581       10,683       21,664       18,207 
revenue
Gross profit            12,978       9,557        25,236       20,090 
Operating
expenses:
Research and             4,483          4,817          8,602          8,990
development
Sales and                5,770          5,705          11,106         9,686
marketing
General and             3,758        2,773        7,635        5,166  
administrative
Total operating         14,011       13,295       27,343       23,842 
expenses
Operating loss           (1,033 )       (3,738 )       (2,107 )       (3,752 )
Interest                 115            170            241            354
expense, net
Other expense,          660          179          712          585    
net
Loss before              (1,808 )       (4,087 )       (3,060 )       (4,691 )
income taxes
Provision for           88           68           149          139    
income taxes
Net loss
attributable to
Model N Inc.            (1,896 )      (4,155 )      (3,209 )      (4,830 )
common
stockholders
Net loss per
share
attributable to        $ (0.19  )     $ (0.54  )     $ (0.35  )     $ (0.63  )
Model N Inc.
common
stockholders
Weighted average
number of shares
used in                 10,137       7,731        9,071        7,677  
computing net
loss per common
share
                                                                             
                                                                             

Model N Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
                  Three months ended           Six months ended
                     March 31,                      March 31,
                     2013          2012           2013          2012
Cash flows
from operating
activities:
Net loss             $ (1,896  )     $ (4,155 )     $ (3,209  )     $ (4,830 )
Adjustments to
reconcile net
loss to net
cash provided
by (used in)
operating
activities:
Depreciation
and                    495             391            937             704
amortization
Amortization
of other               84              68             165             68
intangible
assets
Stock-based            942             1,086          1,499           1,594
compensation
Amortization
of debt                10              11             20              21
discount
Changes in
fair value of
preferred              685             127            671             443
stock warrant
liability
Provision for
doubtful               1               -              9               (10    )
accounts
Deferred               34              32             59              63
income taxes
Changes in
operating
assets and
liabilities,
net of
acquired
assets and
liabilities:
Accounts               748             1,301          (2,732  )       1,967
receivable
Prepaid
expenses and           (151    )       (302   )       (1,491  )       (159   )
other current
assets
Deferred cost
of                     273             (217   )       290             (298   )
implementation
services
Accounts               (862    )       1,284          307             1,593
payable
Accrued
employee               449             3,231          424             1,655
compensation
Other accrued
and long-term          (457    )       363            1,579           601
liabilities
Deferred              (1,756  )      (2,315 )      (1,045  )      2,177  
revenue
Net cash
provided by
(used in)             (1,401  )      905          (2,517  )      5,589  
operating
activities
Cash flows
from investing
activities:
Purchases of
property and           (308    )       (268   )       (472    )       (767   )
equipment
Capitalization
of software            (831    )       -              (1,722  )       -
development
costs
Purchase of
short-term             -               -              (63     )       -
investments
Acquisition of        -             (3,000 )     -             (3,000 )
a business
Net cash used
in investing          (1,139  )      (3,268 )      (2,257  )      (3,767 )
activities
Cash flows
from financing
activities:
Proceeds from
initial public
offering, net          101,064         -              101,064         -
of offering
costs of $7.6
million
Proceeds from
issuance of
common stock           423             29             513             115
upon exercise
of stock
options
Payments for
deferred               (1,761  )       -              (1,976  )       -
offering costs
Principal
payments on            (158    )       (144   )       (298    )       (241   )
capital lease
obligations
Principal
payments on           (625    )      (625   )      (1,250  )      (1,042 )
loan
Net cash
provided by
(used in)             98,943        (740   )      98,053        (1,168 )
financing
activities
Effect of
exchange rate
changes on            (12     )      22           (23     )      (15    )
cash and cash
equivalents
Net change in
cash and cash          96,391          (3,081 )       93,256          639
equivalents
Cash and cash
equivalents at        12,633        22,140       15,768        18,420 
beginning of
period
Cash and cash
equivalents at       $ 109,024      $ 19,059      $ 109,024      $ 19,059 
end of period
                                                                             
                                                                             

Model N Inc.
Reconciliation of GAAP to Non-GAAP Operating Results
(dollars and shares in thousands, except per share amounts)
(unaudited)
                    Three months ended March    Six months ended March
                       31,                           31,
                       2013         2012           2013         2012
Reconciliation
from GAAP net
income (loss) to
adjusted EBITDTA
GAAP net income        $ (1,896 )     $ (4,155 )     $ (3,209 )     $ (4,830 )
(loss):
Reversal of
non-GAAP
expenses:
Stock-based              942            1,086          1,499          1,594
compensation
Depreciation and         578            459            1,102          772
amortization
Interest                 115            170            241            354
expense, net
Other expense,           660            179            712            585
net
LeapFrogRx
compensation             25             1,789          414            1,789
charges
Provision for           88           68           149          139    
income taxes
Adjusted EBITDA        $ 512         $ (404   )     $ 908         $ 403    
                                                                    
                       Three months ended March     Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Reconciliation
from GAAP total
gross profit to
non-GAAP total
gross profit:
GAAP gross             $ 12,978       $ 9,557        $ 25,236       $ 20,090
profit:
Reversal of
non-GAAP
expenses:
Stock-based              204            437            318            538
compensation (a)
Amortization of
intangible               61             50             121            50
assets (b)
LeapFrogRx
compensation            16           1,092        257          1,092  
charges (c)
Non-GAAP gross         $ 13,259      $ 11,136      $ 25,932      $ 21,770 
profit
Percentage of            54.0   %       55.0   %       55.3   %       56.8   %
revenue
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Reconciliation
from GAAP gross
profit to
non-GAAP gross
profit:
for license and
implementation:
GAAP gross
profit - license       $ 7,681        $ 6,144        $ 14,583       $ 12,481
and
implementation:
Reversal of
non-GAAP
expenses:
Stock-based             90           69           130          146    
compensation (a)
Non-GAAP gross
profit - license       $ 7,771       $ 6,213       $ 14,713      $ 12,627 
and
implementation
Percentage of            53.7   %       53.3   %       54.6   %       54.8   %
revenue
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Reconciliation
from GAAP gross
profit to
non-GAAP gross
profit:
for SaaS and
maintenance:
GAAP gross
profit - SaaS          $ 5,297        $ 3,413        $ 10,653       $ 7,609
and maintenance:
Reversal of
non-GAAP
expenses:
Stock-based              114            368            188            392
compensation (a)
Amortization of
intangible               61             50             121            50
assets (b)
LeapFrogRx
compensation            16           1,092        257          1,092  
charges (c)
Non-GAAP gross
profit - SaaS          $ 5,488       $ 4,923       $ 11,219      $ 9,143  
and maintenance
Percentage of            54.5   %       57.4   %       56.2   %       59.9   %
revenue
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Reconciliation
from GAAP
research and
development to
non-GAAP
research and
development:
GAAP research          $ 4,483        $ 4,817        $ 8,602        $ 8,990
and development:
Reversal of
non-GAAP
expenses:
Stock-based              (98    )       (73    )       (152   )       (170   )
compensation (a)
LeapFrogRx
compensation            (4     )      (34    )      (31    )      (34    )
charges (c)
Non-GAAP
research and           $ 4,381       $ 4,710       $ 8,419       $ 8,786  
development
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Reconciliation
from GAAP sales
and marketing to
non-GAAP sales
and marketing:
GAAP sales and         $ 5,770        $ 5,705        $ 11,106       $ 9,686
marketing:
Reversal of
non-GAAP
expenses:
Stock-based              (454   )       (529   )       (713   )       (774   )
compensation (a)
Amortization of
intangible               (22    )       (18    )       (43    )       (18    )
assets (b)
LeapFrogRx
compensation            (4     )      (427   )      (88    )      (427   )
charges (c)
Non-GAAP sales         $ 5,290       $ 4,731       $ 10,262      $ 8,467  
and marketing
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
                                                                    
Reconciliation
from GAAP
general and
administrative
to non-GAAP
general and
administrative:
GAAP general and       $ 3,758        $ 2,773        $ 7,635        $ 5,166
administrative:
Reversal of
non-GAAP
expenses:
Stock-based              (186   )       (47    )       (316   )       (112   )
compensation (a)
LeapFrogRx
compensation            (1     )      (236   )      (38    )      (236   )
charges (c)
Non-GAAP general
and                    $ 3,571       $ 2,490       $ 7,281       $ 4,818  
administrative
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Reconciliation
from GAAP
operating loss
to non-GAAP
operating income
(loss):
GAAP operating         $ (1,033 )     $ (3,738 )     $ (2,107 )     $ (3,752 )
loss:
Reversal of
non-GAAP
expenses:
Stock-based              942            1,086          1,499          1,594
compensation (a)
Amortization of
intangible               83             68             164            68
assets (b)
LeapFrogRx
compensation            25           1,789        414          1,789  
charges (c)
Non-GAAP
operating income       $ 17          $ (795   )     $ (30    )     $ (301   )
(loss)
                                                                    
                       Three months ended March      Six months ended March
                       31,                           31,
                       2013           2012           2013           2012
Numerator:
Reconciliation
between GAAP and
non-GAAP net
loss:
GAAP net loss:         $ (1,896 )     $ (4,155 )     $ (3,209 )     $ (4,830 )
Reversal of
non-GAAP
expenses:
Stock-based              942            1,086          1,499          1,594
compensation (a)
Changes in fair
value of
preferred stock          685            127            671            443
warrant
liability (d)
Amortization of
intangible               83             68             164            68
assets (b)
LeapFrogRx
compensation            25           1,789        414          1,789  
charges (c)
Non-GAAP net
loss
attributable to        $ (161   )     $ (1,085 )     $ (461   )     $ (936   )
Model N Inc.
common
stockholders
Denominator:
Reconciliation
between GAAP and
non-GAAP
weighted average
shares used in
computing
diluted net loss
per common
share:
Weighted average
number of shares
used in                  10,137         7,731          9,071          7,677
computing net
loss per common
share
Assuming the
conversion of
preferred stock         6,284        7,250        6,772        7,250  
at the beginning
of each period
Non-GAAP
weighted average
shares used in
computing               16,421       14,981       15,843       14,927 
non-GAAP net
loss per common
share
GAAP net loss
per share
attributable to        $ (0.19  )     $ (0.54  )     $ (0.35  )     $ (0.63  )
Model N Inc.
common
stockholders
Non-GAAP net
loss per share
attributable to        $ (0.01  )     $ (0.07  )     $ (0.03  )     $ (0.06  )
Model N Inc.
common
stockholders
                                                                    

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements presented on a
GAAP basis, Model N uses non-GAAP measures of adjusted EBITDA, net loss,
weighted average shares outstanding and net loss per share, which are adjusted
to exclude LeapFrogRx compensation charges, stock-based compensation expense,
amortization of intangible assets and changes in fair value of preferred stock
warrant liability and includes dilutive shares where applicable. We believe
these adjustments are appropriate to enhance an overall understanding of our
past financial performance and also our prospects for the future. These
adjustments to our current period GAAP results are made with the intent of
providing both management and investors a more complete understanding of Model
N’s underlying operating results and trends and our marketplace performance.
The non-GAAP results are an indication of our baseline performance that are
considered by management for the purpose of making operational decisions. In
addition, these non-GAAP results are the primary indicators management uses as
a basis for our planning and forecasting of future periods. The presentation
of this additional information is not meant to be considered in isolation or
as a substitute for operating loss, net loss or basic and diluted net loss per
share prepared in accordance with generally accepted accounting principles in
the United States. Non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles and are subject to
limitations.

While a large component of our expense in certain periods, we believe
investors may want to exclude the effects of these items in order to compare
our financial performance with that of other companies and between time
periods:

(a) Stock-based compensation is a non-cash expense accounted for in accordance
with FASB ASC Topic 718. Share-based compensation expenses are excluded from
our non-GAAP income because share-based compensation amounts are difficult to
forecast due in part to the volume and timing of stock option and restricted
stock grants and the volatility our common stock. We believe that the
exclusion of stock-based compensation expense provides for a better comparison
of our operation 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 operation
results to prior periods and to our peer companies.

(c) In January 2012, we acquired LeapFrog Rx for initial cash consideration of
$3.0 million as well as potential additional payments to former LeapFrogRx
shareholders totaling up to $8.3 million which are expected to be incurred
through January 2015. These additional payments are, among other things,
subject to future continued employment and are therefore considered
compensatory in nature and are being recognized as compensation expense
(LeapFrogRx compensation charges) over the term of each component. We believe
that the exclusion of these expenses provides for a better comparison of our
operation results to prior periods and to our peer companies.

(d) Preferred stock warrant was classified as liability and was marked to
market in each period until the preferred stock warrant was converted to
common stock warrant upon the closing date of IPO. The change in fair value of
preferred stock warrant liability was a non-cash item. We believe that the
exclusion of this expense provides for a better comparison of our operation
results to prior periods and to our peer companies.

Contact:

Investor Relations Contact:
ICR for Model N
Greg Kleiner, 650-610-4998
investorrelations@modeln.com
or
Media Contact:
Model N
Kristin Lee, 650-610-4717
Marketing
klee@modeln.com