Model N Announces Second Quarter Fiscal Year 2024 Financial Results

Model N, Inc. (NYSE: MODN), a leader in cloud revenue management solutions, today announced financial results for the second quarter of fiscal year 2024 ended March 31, 2024.

Second Quarter 2024 Financial Highlights

  • Revenues: Total revenues were $65.1 million, an increase of 4% from the second quarter of fiscal year 2023. Subscription revenues were $49.2 million, an increase of 9% from the second quarter of fiscal year 2023.
  • Gross Profit: Gross profit was $37.2 million, an increase of 6% from the second quarter of fiscal year 2023. Gross margin was 57% for the second quarter of fiscal year 2024 compared to 56% for the second quarter of fiscal year 2023. Non-GAAP gross profit was $39.8 million, an increase of 5% from the second quarter of fiscal year 2023. Non-GAAP gross margin was 61% for the second quarter of fiscal year 2024 compared to 60% for the second quarter of fiscal year 2023. Subscription gross margin was 66% compared to 64% for the second quarter of fiscal year 2023. Non-GAAP subscription gross margin was 69% compared to 68% for the second quarter of fiscal year 2023.
  • GAAP Loss and Non-GAAP Income from Operations: GAAP loss from operations was $2.6 million compared to loss from operations of $3.1 million for the second quarter of fiscal year 2023. Non-GAAP income from operations was $10.7 million, an increase of 19% from the second quarter of fiscal year 2023.
  • GAAP Net Loss: GAAP net loss was $1.4 million compared to a net loss of $33.3 million for the second quarter of fiscal year 2023. GAAP diluted net loss per share attributable to common stockholders was $0.04 based upon weighted average shares outstanding of 39.2 million compared to net loss per share of $0.88 for the second quarter of fiscal year 2023 based upon weighted average shares outstanding of 37.9 million.
  • Non-GAAP Net Income: Non-GAAP net income, was $9.4 million, an increase of 38% from the second quarter of fiscal year 2023. Non-GAAP net income per diluted share was $0.24 based upon diluted weighted average shares outstanding of 39.7 million compared to non-GAAP net income per diluted share of $0.18 for the second quarter of fiscal year 2023 based upon diluted weighted average shares outstanding of 38.9 million. Beginning second quarter of fiscal year 2024, Non-GAAP net income is presented after provision for Non-GAAP provision for income tax. The Company utilized a federal rate plus a net state rate that excluded the impact of NOLs and valuation allowances to calculate its non-GAAP blended statutory rate. All periods presented were revised to conform with this presentation.
  • Adjusted EBITDA: Adjusted EBITDA was $10.9 million, an increase of 18% from the second quarter of fiscal year 2023. Adjusted EBITDA margin was 17% compared to 15% for the second quarter of fiscal year 2023.
  • SaaS ARR and SaaS Net Dollar Retention: SaaS ARR hit $139.1 million, representing growth of 11% year-over-year. Trailing 12-month SaaS net dollar retention was 108%.
  • RPO and Current RPO: Total RPO balance was $367.9 million, which was up 9% on a year-over-year basis and up 6% sequentially. The current portion of our RPO balance was up to $168.3 million, representing growth of 15% year-over-year and up 7% sequentially.

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

Transaction with Vista Equity Partners

Due to the Company’s pending acquisition by affiliates of Vista Equity Partners that was announced on April 8, 2024 there will not be a conference call or live webcast to discuss these financial results. In addition, the Company will not be providing financial guidance for the third quarter of fiscal year 2024 and is suspending its financial guidance for the full fiscal year 2024 as a result of the pending transaction.

About Model N

Model N is a leader in revenue optimization and compliance for pharmaceutical, medtech, and high-tech innovators. Our intelligent platform powers your digital transformation with integrated technology, data, analytics, and expert services that deliver deep insight and control.

Our integrated cloud solution is proven to automate pricing, incentive, and contract decisions to scale business profitably and grow revenue. Model N is trusted across more than 120 countries by the world’s leading pharmaceutical, medical technology, semiconductor, and high-tech companies, including Johnson & Johnson, AstraZeneca, Stryker, Seagate Technology, Broadcom, and Microchip Technology. For more information, visit www.modeln.com.

Additional Information and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This press release may be deemed to be solicitation material in respect of the proposed transaction involving Model N, Inc. (“Model N”) and affiliates of Vista Equity Partners. In connection with the proposed transaction, Model N has filed a preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission (the “SEC”) and intends to file a definitive proxy statement on Schedule 14A and furnish to stockholders a proxy statement and WHITE proxy card. This press release is not a substitute for the proxy statement or any other document that Model N may file with the SEC or send to its stockholders in connection with the proposed transaction. INVESTORS AND STOCKHOLDERS OF MODEL N ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MODEL N AND THE PROPOSED TRANSACTION. The preliminary proxy statement and future materials to be filed by Model N will be made available to Model N’s investors and stockholders at no expense to them and copies may be obtained free of charge on Model N’s website at https://investor.modeln.com/. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov.

Model N and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of Model N stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of Model N’s executive officers and directors in the solicitation by reading the preliminary proxy statement filed with the SEC in connection with the transaction, the Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and the subsequent Quarterly Reports on Form 10-Q, and the definitive proxy statement and other relevant materials that will be filed with the SEC in connection with the proposed transaction when they become available. Information concerning the interests of Model N’s participants in the solicitation, which may, in some cases, be different than those of the Model N’s stockholders generally, are set forth in the preliminary proxy statement filed with the SEC and will be set forth in the definitive proxy statement relating to the proposed transaction when it becomes available.

Forward-Looking Statements

This press release may contain forward-looking statements including, among other things, statements regarding the potential merger and financial results of the Model N, as well as any assumptions underlying any of the foregoing. 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) the ability to obtain the requisite approval from stockholders of Model N; (ii) the risk that the proposed transaction may not be completed in a timely manner or at all; (iii) the possibility that competing offers or acquisition proposals for Model N will be made; (iv) the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities; (v) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including in circumstances that would require Model N to pay a termination fee or other expenses; (vi) the effect of the pendency of the proposed transaction on Model N’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, its business generally or its stock price; (vii) risks related to diverting management’s attention from Model N’s ongoing business operations or the loss of one or more members of the management team; (viii) the risk that stockholder litigation in connection with the proposed transaction may result in significant costs of defense, indemnification and liability; (ix) delays in closing customer contracts; (x) Model N’s ability to improve and sustain its sales execution, including increasing bookings and growing revenues; (xi) the timing of new orders and the associated revenue recognition; (xii) adverse changes in general economic or market conditions; (xiii) delays or reductions in information technology spending and resulting variability in customer orders from quarter to quarter; (xiv) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by Model N’s competitors; (xv) Model N’s ability to increase and manage its growth effectively; (xvi) acceptance of Model N’s applications and services by customers; (xvii) success of new products; (xviii) the risk that the strategic initiatives that Model N may pursue will not result in significant future revenues; (xiv) changes in health care regulation and policy and tax in the United States and worldwide; (xx) Model N’s ability to retain customers; and (xxi) adverse impacts on Model N’s business and financial condition due to macroeconomic and geopolitical factors, such as inflation, rising interests, pandemics, banking system instability and geopolitical conflicts. Further information on risks that could affect Model N’s results is included in its filings with the SEC, including its most recent quarterly report on Form 10-Q and its annual report on Form 10-K for the fiscal year ended September 30, 2023, and any current reports on Form 8-K that it 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 communication.

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 gross margin, non-GAAP subscription gross profit, non-GAAP subscription gross margin, non-GAAP income from operations, non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and free cash flow. Non-GAAP gross profit and subscription gross profit excludes stock-based compensation expenses and amortization of intangible assets as they are often excluded by other companies to help investors understand the operational performance of their business. Non-GAAP income from operations excludes stock-based compensation expense and amortization of intangible assets. Non-GAAP net income excludes stock-based compensation expense, amortization of intangible assets, amortization of debt issuance costs, and loss on extinguishment of debt. Additionally, stock-based compensation expense varies from period to period and from company to company due to such things as valuation methodologies and changes in stock price. Adjusted EBITDA is defined as net loss, adjusted for depreciation and amortization, stock-based compensation expense, interest expenses, interest income, other income (expenses), net, provision for income taxes, and loss on extinguishment of debt. Reconciliation tables are provided in this press release.

SaaS ARR is defined as the annualized value of our SaaS revenue, which is derived by dividing the SaaS portion of our recurring subscription revenue for the quarter by the number of days in the quarter, and multiplying it by 365 to get an annualized number. SaaS Net Dollar Retention uses the same SaaS ARR calculations to measure the percentage change in SaaS ARR from customers that are in the current period and the year-ago period. SaaS ARR that has been added from new customers that were not in the year-ago calculation is excluded from the SaaS Net Dollar Retention calculation. SaaS Net Dollar Retention has been reduced by any amount of churn for the customers that were in the year-ago period. SaaS ARR and SaaS Net Dollar Retention should be viewed independently of revenue, deferred revenue, and remaining performance obligations, and are not intended to be a substitute for, or combined with, any of these items.

Free cash flow is defined as net cash provided by operating activities less cash used for purchase of property plant and equipment.

We have not reconciled guidance for non-GAAP financial measures to their most directly comparable GAAP measures because certain items that impact these measures are uncertain, out of our control and/or cannot be reasonably predicted or estimated, such as the difficulties of estimating certain items such as charges to stock-based compensation expense. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.

Model N, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

As of March 31, 2024

 

As of September 30, 2023

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

334,559

 

 

$

301,355

 

Funds held for customers

 

86

 

 

 

91

 

Accounts receivable, net

 

79,260

 

 

 

61,761

 

Prepaid expenses

 

4,610

 

 

 

5,922

 

Other current assets

 

8,462

 

 

 

14,777

 

Total current assets

 

426,977

 

 

 

383,906

 

Property and equipment, net

 

1,125

 

 

 

1,242

 

Operating lease right-of-use assets

 

7,707

 

 

 

9,885

 

Goodwill

 

65,665

 

 

 

65,665

 

Intangible assets, net

 

26,795

 

 

 

30,176

 

Other assets

 

10,131

 

 

 

9,221

 

Total assets

$

538,400

 

 

$

500,095

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

4,483

 

 

$

3,888

 

Customer funds payable

 

86

 

 

 

91

 

Accrued employee compensation

 

14,257

 

 

 

14,645

 

Accrued liabilities

 

5,485

 

 

 

8,700

 

Operating lease liabilities, current portion

 

4,151

 

 

 

4,408

 

Deferred revenue, current portion

 

82,074

 

 

 

61,745

 

Total current liabilities

 

110,536

 

 

 

93,477

 

Long-term liabilities

 

 

 

Long term debt

 

281,203

 

 

 

280,358

 

Operating lease liabilities, less current portion

 

4,705

 

 

 

6,755

 

Other long-term liabilities

 

4,933

 

 

 

4,042

 

Total long-term liabilities

 

290,841

 

 

 

291,155

 

Total liabilities

 

401,377

 

 

 

384,632

 

Stockholders’ equity

 

 

 

Common stock

 

6

 

 

 

6

 

Additional paid-in capital

 

439,297

 

 

 

414,562

 

Accumulated other comprehensive loss

 

(2,235

)

 

 

(2,245

)

Accumulated deficit

 

(300,045

)

 

 

(296,860

)

Total stockholders’ equity

 

137,023

 

 

 

115,463

 

Total liabilities and stockholders’ equity

$

538,400

 

 

$

500,095

 

 

 

 

 

Model N, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues

 

 

 

 

 

 

 

Subscription

$

49,182

 

 

$

44,925

 

 

$

96,837

 

 

$

89,139

 

Professional services

 

15,929

 

 

 

17,679

 

 

 

31,765

 

 

 

32,619

 

Total revenues

 

65,111

 

 

 

62,604

 

 

 

128,602

 

 

 

121,758

 

Cost of revenues

 

 

 

 

 

 

 

Subscription

 

16,833

 

 

 

16,121

 

 

 

33,544

 

 

 

31,727

 

Professional services

 

11,040

 

 

 

11,499

 

 

 

22,198

 

 

 

22,164

 

Total cost of revenues

 

27,873

 

 

 

27,620

 

 

 

55,742

 

 

 

53,891

 

Gross profit

 

37,238

 

 

 

34,984

 

 

 

72,860

 

 

 

67,867

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

12,588

 

 

 

12,403

 

 

 

25,268

 

 

 

25,167

 

Sales and marketing

 

15,157

 

 

 

14,222

 

 

 

29,117

 

 

 

27,199

 

General and administrative

 

12,118

 

 

 

11,481

 

 

 

23,767

 

 

 

22,172

 

Total operating expenses

 

39,863

 

 

 

38,106

 

 

 

78,152

 

 

 

74,538

 

Loss from operations

 

(2,625

)

 

 

(3,122

)

 

 

(5,292

)

 

 

(6,671

)

Interest expense

 

1,836

 

 

 

1,508

 

 

 

3,670

 

 

 

2,942

 

Loss on extinguishment of debt

 

 

 

 

29,493

 

 

 

 

 

 

29,493

 

Interest income

$

(3,842

)

 

 

(1,789

)

 

 

(7,382

)

 

 

(3,089

)

Other expenses (income), net

 

(10

)

 

 

83

 

 

 

107

 

 

 

18

 

Loss before income taxes

 

(609

)

 

 

(32,417

)

 

 

(1,687

)

 

 

(36,035

)

Provision for income taxes

 

778

 

 

 

902

 

 

 

1,498

 

 

 

1,334

 

Net loss

$

(1,387

)

 

$

(33,319

)

 

$

(3,185

)

 

$

(37,369

)

Net loss per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.04

)

 

$

(0.88

)

 

$

(0.08

)

 

$

(0.99

)

Weighted average number of shares used in computing net loss per share:

 

 

 

 

 

 

 

Basic and diluted

 

39,225

 

 

 

37,917

 

 

 

39,062

 

 

 

37,719

 

 

 

 

 

 

 

 

 

Model N, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

Six Months Ended March 31,

 

 

2024

 

 

 

2023

 

Cash Flows from Operating Activities:

 

 

 

Net loss

$

(3,185

)

 

$

(37,369

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

3,816

 

 

 

4,262

 

Stock-based compensation

 

22,187

 

 

 

20,767

 

Amortization of debt issuance costs

 

845

 

 

 

629

 

Loss on extinguishment of debt

 

 

 

 

29,493

 

Deferred income taxes

 

249

 

 

 

(156

)

Amortization of capitalized contract acquisition costs

 

2,642

 

 

 

2,416

 

Other non-cash charges

 

(4

)

 

 

1,077

 

Changes in assets and liabilities, net of acquisition:

 

 

 

Accounts receivable

 

(17,519

)

 

 

(27,963

)

Prepaid expenses and other assets

 

6,325

 

 

 

8,471

 

Accounts payable

 

582

 

 

 

(1,300

)

Accrued employee compensation

 

(390

)

 

 

(9,890

)

Other current and long-term liabilities

 

(5,051

)

 

 

(5,150

)

Deferred revenue

 

20,493

 

 

 

8,563

 

Net cash provided by (used in) operating activities

 

30,990

 

 

 

(6,150

)

Cash Flows from Investing Activities:

 

 

 

Purchases of property and equipment

 

(339

)

 

 

(106

)

Net cash used in investing activities

 

(339

)

 

 

(106

)

Cash Flows from Financing Activities:

 

 

 

Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan

 

2,548

 

 

 

2,555

 

Proceeds from issuance of 2028 Notes

 

 

 

 

253,000

 

Payment of debt issuance cost for 2028 Notes

 

 

 

 

(6,958

)

Repayments of 2025 Notes

 

 

 

 

(165,210

)

Net changes in customer funds payable

 

(5

)

 

 

(374

)

Net cash provided by financing activities

 

2,543

 

 

 

83,013

 

Effect of exchange rate changes on cash and cash equivalents

 

5

 

 

 

(12

)

Net increase in cash and cash equivalents

 

33,199

 

 

 

76,745

 

Cash and cash equivalents

 

 

 

Beginning of period

 

301,446

 

 

 

194,127

 

End of period

$

334,645

 

 

$

270,872

 

 

 

 

 

Model N, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results

(in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Reconciliation from GAAP net loss to adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(1,387

)

 

$

(33,319

)

 

$

(3,185

)

 

$

(37,369

)

Reversal of non-GAAP items

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

11,622

 

 

 

10,362

 

 

 

22,187

 

 

 

20,767

 

Depreciation and amortization

 

 

1,856

 

 

 

1,989

 

 

 

3,816

 

 

 

4,262

 

Interest expense

 

 

1,836

 

 

 

1,508

 

 

 

3,670

 

 

 

2,942

 

Loss on extinguishment of debt

 

 

 

 

 

29,493

 

 

 

 

 

 

29,493

 

Interest income

 

 

(3,842

)

 

 

(1,789

)

 

 

(7,382

)

 

 

(3,089

)

Other (income) expense, net

 

 

(10

)

 

 

83

 

 

 

107

 

 

 

18

 

Provision for income taxes

 

 

778

 

 

 

902

 

 

 

1,498

 

 

 

1,334

 

Adjusted EBITDA

 

$

10,853

 

 

$

9,229

 

 

$

20,711

 

 

$

18,358

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Reconciliation from GAAP gross profit to non-GAAP gross profit

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

37,238

 

 

$

34,984

 

 

$

72,860

 

 

$

67,867

 

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

 

2,175

 

 

 

2,370

 

 

 

4,390

 

 

 

4,847

 

Amortization of intangible assets (b)

 

 

427

 

 

 

427

 

 

 

854

 

 

 

1,136

 

Non-GAAP gross profit

 

$

39,840

 

 

$

37,781

 

 

$

78,104

 

 

$

73,850

 

Percentage of revenue

 

 

61.2

%

 

 

60.3

%

 

 

60.7

%

 

 

60.7

%

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Reconciliation from GAAP subscription gross profit to non-GAAP subscription gross profit

 

 

 

 

 

 

 

 

GAAP subscription gross profit

 

$

32,349

 

 

$

28,804

 

 

$

63,293

 

 

$

57,412

 

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

 

1,208

 

 

 

1,307

 

 

 

2,443

 

 

 

2,644

 

Amortization of intangible assets (b)

 

 

427

 

 

 

427

 

 

 

854

 

 

 

1,136

 

Non-GAAP subscription gross profit

 

$

33,984

 

 

$

30,538

 

 

$

66,590

 

 

$

61,192

 

Percentage of subscription revenue

 

 

69.1

%

 

 

68.0

%

 

 

68.8

%

 

 

68.6

%

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Reconciliation from GAAP professional services gross profit to non-GAAP professional services gross profit

 

 

 

 

 

 

 

 

GAAP professional services gross profit

 

$

4,889

 

 

$

6,180

 

 

$

9,567

 

 

$

10,455

 

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

 

967

 

 

 

1,063

 

 

 

1,947

 

 

 

2,203

 

Non-GAAP professional services gross profit

 

$

5,856

 

 

$

7,243

 

 

$

11,514

 

 

$

12,658

 

Percentage of professional services revenue

 

 

36.8

%

 

 

41.0

%

 

 

36.2

%

 

 

38.8

%

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Reconciliation from GAAP operating loss to non-GAAP operating income

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(2,625

)

 

$

(3,122

)

 

$

(5,292

)

 

$

(6,671

)

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

 

11,622

 

 

 

10,362

 

 

 

22,187

 

 

 

20,767

 

Amortization of intangible assets (b)

 

 

1,655

 

 

 

1,726

 

 

 

3,381

 

 

 

3,734

 

Non-GAAP operating income

 

$

10,652

 

 

$

8,966

 

 

$

20,276

 

 

$

17,830

 

 

 

 

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

 

 

Reconciliation between GAAP net loss and non-GAAP net income

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(1,387

)

 

$

(33,319

)

 

$

(3,185

)

 

$

(37,369

)

GAAP provision for income tax

 

 

778

 

 

 

902

 

 

 

1,498

 

 

 

1,334

 

GAAP loss before provision for income tax

 

 

(609

)

 

 

(32,417

)

 

 

(1,687

)

 

 

(36,035

)

Reversal of non-GAAP expenses

 

 

 

 

 

 

 

 

Stock-based compensation (a)

 

 

11,622

 

 

 

10,362

 

 

 

22,187

 

 

 

20,767

 

Amortization of intangible assets (b)

 

 

1,655

 

 

 

1,726

 

 

 

3,381

 

 

 

3,734

 

Loss on extinguishment of debt (c)

 

 

 

 

 

29,493

 

 

 

 

 

 

29,493

 

Amortization of debt issuance costs (c)

 

 

424

 

 

 

327

 

 

 

845

 

 

 

629

 

Non-GAAP net income before income tax provision

 

$

13,092

 

 

$

9,491

 

 

$

24,726

 

 

$

18,588

 

 

 

 

 

 

 

 

 

 

Non-GAAP provision for income taxes (d)

 

 

(3,666

)

 

 

(2,657

)

 

 

(6,923

)

 

 

(5,205

)

Non-GAAP net income

 

$

9,426

 

 

$

6,834

 

 

$

17,803

 

 

$

13,383

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

Reconciliation between GAAP net loss and non-GAAP net income per share

 

 

 

 

 

 

 

 

Shares used in computing GAAP net loss per share:

 

 

 

 

 

 

 

 

Basic

 

 

39,225

 

 

 

37,917

 

 

 

39,062

 

 

 

37,719

 

Diluted

 

 

39,225

 

 

 

37,917

 

 

 

39,062

 

 

 

37,719

 

Shares used in computing non-GAAP net income per share

 

 

 

 

 

 

 

 

Basic

 

 

39,225

 

 

 

37,917

 

 

 

39,062

 

 

 

37,719

 

Add: effect of shares for stock plan activity

 

 

434

 

 

 

555

 

 

 

335

 

 

 

589

 

Add: effect of shares related to convertible senior notes

 

 

 

 

 

378

 

 

 

 

 

 

486

 

Diluted

 

 

39,659

 

 

 

38,850

 

 

 

39,397

 

 

 

38,794

 

GAAP net loss per share

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.04

)

 

$

(0.88

)

 

$

(0.08

)

 

$

(0.99

)

Non-GAAP net income per share

 

 

 

 

 

 

 

 

Basic

 

$

0.24

 

 

$

0.18

 

 

$

0.46

 

 

$

0.35

 

Diluted

 

$

0.24

 

 

$

0.18

 

 

$

0.45

 

 

$

0.34

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2024

 

2023

 

2024

 

2023

Amortization of intangibles assets recorded in the statements of operations

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

Subscription

 

$

427

 

$

427

 

$

854

 

$

1,136

Total amortization of intangibles assets in cost of revenue (b)

 

 

427

 

 

427

 

 

854

 

 

1,136

Operating expenses

 

 

 

 

 

 

 

 

Sales and marketing

 

 

1,228

 

 

1,299

 

 

2,527

 

 

2,598

Total amortization of intangibles assets in operating expense (b)

 

 

1,228

 

 

1,299

 

 

2,527

 

 

2,598

Total amortization of intangibles assets (b)

 

$

1,655

 

$

1,726

 

$

3,381

 

$

3,734

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2024

 

2023

 

2024

 

2023

Stock-based compensation recorded in the statements of operations

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

Subscription

 

$

1,208

 

$

1,307

 

$

2,443

 

$

2,644

Professional services

 

 

967

 

 

1,063

 

 

1,947

 

 

2,203

Total stock-based compensation in cost of revenue (a)

 

 

2,175

 

 

2,370

 

 

4,390

 

 

4,847

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

1,818

 

 

1,831

 

 

3,537

 

 

3,653

Sales and marketing

 

 

3,209

 

 

2,561

 

 

5,770

 

 

4,949

General and administrative

 

 

4,420

 

 

3,600

 

 

8,490

 

 

7,318

Total stock-based compensation in operating expense (a)

 

 

9,447

 

 

7,992

 

 

17,797

 

 

15,920

Total stock-based compensation (a)

 

$

11,622

 

$

10,362

 

$

22,187

 

$

20,767

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Free cash flow

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

28,885

 

 

$

12,142

 

 

$

30,990

 

 

$

(6,150

)

Purchases of property and equipment

 

 

(240

)

 

 

(80

)

 

 

(339

)

 

 

(106

)

Free cash flow

 

$

28,645

 

 

$

12,062

 

 

$

30,651

 

 

$

(6,256

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of adjusted EBITDA, gross profit, gross margin, income from operations, net income, weighted average shares outstanding and net income per share, which are adjusted to exclude stock-based compensation expense, amortization of intangible assets, depreciation of fixed assets, amortization of debt issuance costs, loss on extinguishment of debt, and include 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 our 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 expenses incurred 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. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating 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 operating results to prior periods and to our peer companies.

(c) Amortization of debt issuance costs. We believe exclusion of these expenses provides for a better comparison of our operating results to prior periods and to our peer companies.

(d) The Company utilized a federal rate plus a net state rate that excluded the impact of NOLs and valuation allowances to calculate its non-GAAP blended statutory rate of 28% for the three and the six months ended March 31, 2024, and 2023.

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