Business Wire | Nov 9, 2021 04:06PM EST

Model N Announces Fourth Quarter and Fiscal Year 2021 Financial Results

Nov. 09, 2021

SAN MATEO, Calif.--(BUSINESS WIRE)--Nov. 09, 2021--Model N, Inc. (NYSE: MODN), the leader in cloud revenue management solutions, today announced financial results for the fourth quarter and fiscal year 2021 ended September 30, 2021.

"We finished fiscal 2021 with a healthy contribution from all of our growth levers. During the fourth quarter, we signed multiple new logos and SaaS transitions, numerous customer base expansions, and we also enjoyed strong renewals across the board. Our results clearly illustrate the success of our strategic focus on the Life Sciences and High Tech verticals and the value our customers place on our mission-critical products," said Jason Blessing, president and chief executive officer of Model N. "I'm proud of our execution this past year, and I'm optimistic about the opportunity ahead for Model N. We are entering fiscal 2022 with positive momentum."

Recent Highlights

* Strong performance in Life Sciences Vertical Powered by the Addition of New Customers, Expansions with Existing Customers and SaaS Transition Commitments - Model N continued to bolster its stronghold in the Life Sciences vertical, adding new and expanding with existing customers as well as securing additional commitments for SaaS transitions. During the quarter, the Company signed new agreements with Cerecor and Jazz Pharmaceuticals, among others. Model N also expanded our relationship with AstraZeneca, Fresenius and Viatris. Also in the quarter, two long-time Model N customers committed to SaaS transitions, such as EMD Serono, the biopharmaceutical business of Merck in the U.S. and Canada, as well as Alkermes, a fully integrated, global biopharmaceutical company developing innovative medicines in the fields of neuroscience and oncology. EMD Serono and Alkermes are deepening their relationships with the Company and continuing Model N's success in moving its customers to its cloud platform. * High Tech Vertical Adds New Customers - In the fourth quarter, the Company demonstrated growing momentum in the High Tech vertical with the addition of Cricut, a $1 billion manufacturer of computer-controlled cutting machines and scanners used for designing in the consumer market, and Ergotron, a global manufacturer of innovative, ergonomic mounting and mobility products for computer monitors, notebooks and flat panels. * Positioned as a Leader in the IDC MarketScape: Worldwide B2B Price Optimization and Management Applications 2021 Vendor Assessment - During the fourth quarter, Model N was recognized as a leader in a new IDC Marketscape report. The report cited multiple strengths of Model N's cloud revenue management platform for High Tech, including pricing and Deal Guidance, Readiness for the Future and Value Delivered. IDC noted that, "Because of Model N's focus on this industry, the suite has highly configurable features and workflows that are tailored for selling in this industry, such as pricing models that support the fast turnover due to technology evolution, deal management, price protection, claims processing, high-tech revenue intelligence and margin optimization, rebates, payouts, and Ship and Debit." The report further states that organizations in the high-tech hardware and/or semiconductor industries should consider Model N when they "need an end-to-end revenue management solution for managing pricing and channel incentives."

Fourth Quarter 2021 Financial Highlights

* Revenues: Total revenues were $51.5 million, an increase of 24% from the fourth quarter of fiscal year 2020. Subscription revenues were $38.2 million, an increase of 29% from the fourth quarter of fiscal year 2020. Business Services, acquired from Deloitte, contributed $6.0 million in total revenues for the fourth quarter of fiscal year 2021. * Gross Profit: Gross profit was $28.8 million, an increase of 16% from the fourth quarter of fiscal year 2020. Gross margin was 56% compared to 60% for the fourth quarter of fiscal year 2020. Non-GAAP gross profit was $31.7 million, an increase of 21% from the fourth quarter of fiscal year 2020. Non-GAAP gross margin was 62% compared to 63% for the fourth quarter of fiscal year 2020. Subscription gross margin was 65% compared to 71% for the fourth quarter of fiscal year 2020. Non-GAAP subscription gross margin was 70% compared to 74% for the fourth quarter of fiscal year 2020. Both GAAP and Non-GAAP gross margins for the fourth quarter of fiscal year 2021 were impacted by the revenue mix coming from the acquisition of Business Services. * GAAP Income (Loss) and Non-GAAP Income from Operations: GAAP loss from operations was $(2.4) million compared to income from operations of $0.4 million for the fourth quarter of fiscal year 2020. Non-GAAP income from operations was $7.7 million, an increase of 13% from the fourth quarter of fiscal year 2020. * GAAP Net Loss: GAAP net loss was $(6.1) million compared to a net loss of $(3.7) million for the fourth quarter of fiscal year 2020. GAAP basic and diluted net loss per share attributable to common stockholders was $(0.17) based upon weighted average shares outstanding of 35.9 million compared to net loss per share of $(0.11) for the fourth quarter of fiscal year 2020 based upon weighted average shares outstanding of 34.7 million. * Non-GAAP Net Income: Non-GAAP net income was $6.6 million, an increase of 31% from the fourth quarter of fiscal year 2020. Non-GAAP net income per diluted share was $0.18 based upon diluted weighted average shares outstanding of 36.5 million compared to non-GAAP net income per diluted share of $0.14 for the fourth quarter of fiscal year 2020 based upon diluted weighted average shares outstanding of 36.4 million. * Adjusted EBITDA: Adjusted EBITDA was $7.9 million, an increase of 14% from the fourth quarter of fiscal year 2020.

Fiscal Year 2021 Financial Highlights

* Revenues: Total revenues were $193.4 million, an increase of 20% from fiscal year 2020. Subscription revenues were $142.4 million, an increase of 23% from fiscal year 2020. Business Services, which we acquired from Deloitte, contributed $18.5 million in total revenues for fiscal year 2021. * Gross Profit: Gross profit was $106.8 million, an increase of 12% from fiscal year 2020. Gross margin was 55% compared to 59% for fiscal year 2020. Non-GAAP gross profit was $116.9 million, an increase of 16% from fiscal year 2020. Non-GAAP gross margins were 60% compared to 63% for fiscal year 2020. Subscription gross margin was 65% compared to 70% for fiscal year 2020. Non-GAAP subscription gross margin was 69% compared to 73% for fiscal year 2020. Both GAAP and Non-GAAP gross margins for fiscal year 2021 were impacted by the revenue mix coming from the acquisition of Business Services. * GAAP Loss and Non-GAAP Income from Operations: GAAP loss from operations was $(14.4) million compared to $(6.6) million for fiscal year 2020. Non-GAAP income from operations was $25.3 million, an increase of 22% from fiscal year 2020. * GAAP Net Loss: GAAP net loss was $(29.7) million compared to $(13.7) million for fiscal year 2020. GAAP basic and diluted net loss per share attributed to common stockholders was $(0.84) based upon weighted average shares outstanding of 35.5 million compared to net loss per share of $(0.40) for fiscal year 2020 based upon weighted average shares outstanding of 34.0 million. * Non-GAAP Net Income: Non-GAAP net income was $19.8 million, an increase of 16% from fiscal year 2020. Non-GAAP net income per diluted share was $0.54 based upon diluted weighted average shares outstanding of 36.5 million compared to non-GAAP net income per diluted share of $0.48 for fiscal year 2020 based upon diluted weighted average shares outstanding of 35.4 million. * Adjusted EBITDA: Adjusted EBITDA was $26.0 million, an increase of 22% from fiscal year 2020. * Cash and Cash Flows: Cash and cash equivalents as of September 30, 2021 totaled $165.5 million. Net cash provided by operating activities was $19.6 million for fiscal year 2021 compared with $14.4 million in fiscal year 2020. Free cash flow was $18.5 million for fiscal year 2021 compared with $13.8 million in fiscal year 2020.

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

Guidance

As of November 9, 2021, we are providing guidance for the first quarter fiscal year 2022 and issuing guidance for the full fiscal year ending September 30, 2022.

(in $ millions, except per First Quarter Fiscal Full Year Fiscal 2022share) 2022

Total revenues 49.5 - 50.0 211.0 - 214.0

Subscription revenues 37.0 - 37.5 152.0 - 155.0

Non-GAAP income from operations 4.3 - 4.8 22.0 - 24.0

Non-GAAP net income per share 0.08 - 0.09 0.44 - 0.49

Adjusted EBITDA 4.5 - 5.0 23.0 - 25.0

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 fourth quarter and fiscal year 2021 ended September 30, 2021. The conference call can be accessed by dialing 877-407-4018 from the United States or +1-201-689-8471 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 November 23, 2021, a telephone replay will be available by dialing 844-512-2921 from the United States or +1-412-317-6671, internationally, with recording access code 13723796.

About Model N

Model N enables life sciences and high tech companies to drive growth and market share, minimizing revenue leakage throughout the revenue lifecycle. With deep industry expertise and solutions purpose-built for these industries, Model N delivers comprehensive visibility, insight and control over the complexities of commercial operations and compliance. Its 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.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding Model N's first quarter and full year fiscal 2022 financial results, Model N's profitability, future planned enhancements to our products and benefits from our products, and expected benefits from our acquisition. 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; (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; (xii) our ability to retain customers; (xiii) adverse impacts on our business and financial condition due to COVID-19; and (xiv) the possibility that the expected benefits related to our acquisition may not materialize as expected and our ability to successfully integrate Deloitte's life sciences pricing and contracting solutions business and underlying technology. 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, 2020, 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 gross margin, non-GAAP subscription gross profit, non-GAAP subscription gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share, and adjusted EBITDA. Non-GAAP gross profit excludes stock-based compensation expenses, amortization of intangible assets, and deferred revenue adjustments as they are often excluded by other companies to help investors understand the operational performance of their business. Non-GAAP income (loss) from operations excludes stock-based compensation expense, amortization of intangible assets, acquisition-related expense, and deferred revenue adjustments. Non-GAAP net income (loss) excludes stock-based compensation expense, amortization of intangible assets, acquisition-related expense, amortization of debt discount and issuance costs, and deferred revenue adjustments. 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, acquisition-related expense, deferred revenue adjustment, interest (income) expense, net, other (income) expenses, net, and provision for (benefit from) income taxes. Reconciliation tables are provided in this press release.

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 As of September 30, September 30, 2021 2020

Assets

Current assets

Cash and cash equivalents $ 165,467 $ 200,491

Funds held for customers 316 -

Accounts receivable, net 43,185 35,796

Prepaid expenses 4,920 2,797

Other current assets 8,442 7,314

Total current assets 222,330 246,398

Property and equipment, net 1,907 1,034

Operating lease right-of-use assets 20,565 3,332

Goodwill 65,665 39,283

Intangible assets, net 45,394 24,380

Other assets 7,929 5,863

Total assets $ 363,790 $ 320,290

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable $ 4,802 $ 3,009

Customer funds payable 316 -

Accrued employee compensation 24,662 17,056

Accrued liabilities 4,719 5,237

Operating lease liabilities, current 4,529 1,460 portion

Deferred revenue, current portion 57,431 50,904

Total current liabilities 96,459 77,666

Long-term liabilities

Long term debt 124,301 114,438

Operating lease liabilities, less current 17,229 2,067 portion

Other long-term liabilities 2,283 1,448

Total long-term liabilities 143,813 117,953

Total liabilities 240,272 195,619

Stockholders' equity

Common stock 5 5

Preferred stock - -

Additional paid-in capital 380,528 351,952

Accumulated other comprehensive loss (1,205 ) (1,213 )

Accumulated deficit (255,810 ) (226,073 )

Total stockholders' equity 123,518 124,671

Total liabilities and stockholders' equity $ 363,790 $ 320,290

Model N, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Revenues

Subscription

$

38,164

$

29,672

$

142,448

$

116,184

Professional services

13,317

11,788

50,997

44,872

Total revenues

51,481

41,460

193,445

161,056

Cost of revenues

Subscription

13,408

8,579

49,933

34,461

Professional services

9,297

8,009

36,715

31,035

Total cost of revenues

22,705

16,588

86,648

65,496

Gross profit

28,776

24,872

106,797

95,560

Operating expenses

Research and development

11,795

8,455

44,661

34,361

Sales and marketing

11,128

9,297

43,239

38,979

General and administrative

8,259

6,757

33,311

28,826

Total operating expenses

31,182

24,509

121,211

102,166

Income (loss) from operations

(2,406

)

363

(14,414

)

(6,606

)

Interest expense, net

3,699

3,371

14,344

6,322

Other expenses (income), net

35

347

210

(76

)

Loss before income taxes

(6,140

)

(3,355

)

(28,968

)

(12,852

)

Provision for (benefit from) income taxes

(71

)

302

769

812

Net loss

$

(6,069

)

$

(3,657

)

$

(29,737

)

$

(13,664

)

Net loss per share:

Basic and diluted

$

(0.17

)

$

(0.11

)

$

(0.84

)

$

(0.40

)

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

Basic and diluted

35,921

34,684

35,461

34,008

Model N, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Revenues

Subscription $ 38,164 $ 29,672 $ 142,448 $ 116,184

Professional services 13,317 11,788 50,997 44,872

Total revenues 51,481 41,460 193,445 161,056

Cost of revenues

Subscription 13,408 8,579 49,933 34,461

Professional services 9,297 8,009 36,715 31,035

Total cost of revenues 22,705 16,588 86,648 65,496

Gross profit 28,776 24,872 106,797 95,560

Operating expenses

Research and development 11,795 8,455 44,661 34,361

Sales and marketing 11,128 9,297 43,239 38,979

General and administrative 8,259 6,757 33,311 28,826

Total operating expenses 31,182 24,509 121,211 102,166

Income (loss) from (2,406 ) 363 (14,414 ) (6,606 )operations

Interest expense, net 3,699 3,371 14,344 6,322

Other expenses (income), 35 347 210 (76 )net

Loss before income taxes (6,140 ) (3,355 ) (28,968 ) (12,852 )

Provision for (benefit (71 ) 302 769 812 from) income taxes

Net loss $ (6,069 ) $ (3,657 ) $ (29,737 ) $ (13,664 )

Net loss per share:

Basic and diluted $ (0.17 ) $ (0.11 ) $ (0.84 ) $ (0.40 )

Weighted average number ofshares used in computing net loss per share:

Basic and diluted 35,921 34,684 35,461 34,008

Model N, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Twelve Months Ended September 30,

2021

2020

Cash Flows from Operating Activities

Net loss

$

(29,737

)

$

(13,664

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

7,972

5,498

Stock-based compensation

29,963

22,500

Amortization of debt discount and issuance costs

9,863

3,405

Deferred income taxes

95

389

Amortization of capitalized contract acquisition costs

3,114

2,459

Loss on early extinguishment of debt

-

319

Other non-cash charges

10

(4

)

Changes in assets and liabilities, net of acquisition

Accounts receivable

(3,542

)

(8,836

)

Prepaid expenses and other assets

(4,224

)

(3,091

)

Accounts payable

1,695

544

Accrued employee compensation

1,933

927

Other current and long-term liabilities

(2,003

)

(2,433

)

Deferred revenue

4,451

6,393

Net cash provided by operating activities

19,590

14,406

Cash Flows from Investing Activities

Purchases of property and equipment

(1,055

)

(579

)

Acquisition of business

(57,849

)

-

Net cash used in investing activities

(58,904

)

(579

)

Cash Flows from Financing Activities

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

4,307

4,234

Proceeds from issuance of convertible senior notes, net of issuance costs

-

166,409

Principal payments on debt

-

(44,750

)

Net changes in customer funds payable

316

-

Net cash provided by financing activities

4,623

125,893

Effect of exchange rate changes on cash and cash equivalents

(17

)

(9

)

Net increase (decrease) in cash and cash equivalents

(34,708

)

139,711

Cash and cash equivalents

Beginning of period

200,491

60,780

End of period

$

165,783

$

200,491

Model N, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Twelve Months Ended September 30,

2021 2020

Cash Flows from Operating Activities

Net loss $ (29,737 ) $ (13,664 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 7,972 5,498

Stock-based compensation 29,963 22,500

Amortization of debt discount and issuance costs 9,863 3,405

Deferred income taxes 95 389

Amortization of capitalized contract acquisition costs 3,114 2,459

Loss on early extinguishment of debt - 319

Other non-cash charges 10 (4 )

Changes in assets and liabilities, net of acquisition

Accounts receivable (3,542 ) (8,836 )

Prepaid expenses and other assets (4,224 ) (3,091 )

Accounts payable 1,695 544

Accrued employee compensation 1,933 927

Other current and long-term liabilities (2,003 ) (2,433 )

Deferred revenue 4,451 6,393

Net cash provided by operating activities 19,590 14,406

Cash Flows from Investing Activities

Purchases of property and equipment (1,055 ) (579 )

Acquisition of business (57,849 ) -

Net cash used in investing activities (58,904 ) (579 )

Cash Flows from Financing Activities

Proceeds from exercise of stock options and issuance 4,307 4,234 of employee stock purchase plan

Proceeds from issuance of convertible senior notes, - 166,409 net of issuance costs

Principal payments on debt - (44,750 )

Net changes in customer funds payable 316 -

Net cash provided by financing activities 4,623 125,893

Effect of exchange rate changes on cash and cash (17 ) (9 )equivalents

Net increase (decrease) in cash and cash equivalents (34,708 ) 139,711

Cash and cash equivalents

Beginning of period 200,491 60,780

End of period $ 165,783 $ 200,491

Model N, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results

(in thousands, except per share amounts)

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Reconciliation from GAAP net loss to adjusted EBITDA

GAAP net loss

$

(6,069

)

$

(3,657

)

$

(29,737

)

$

(13,664

)

Reversal of non-GAAP items

Stock-based compensation expense

8,113

5,268

29,963

22,500

Depreciation and amortization

2,232

1,335

7,972

5,498

Acquisition-related expense

-

-

2,509

-

Interest expense, net

3,699

3,371

14,344

6,322

Other expenses (income), net

35

347

210

(76

)

Provision for (benefit from) income taxes

(71

)

302

769

812

Adjusted EBITDA

$

7,939

$

6,966

$

26,030

$

21,392

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Reconciliation from GAAP gross profit to non-GAAP gross profit

GAAP gross profit

$

28,776

$

24,872

$

106,797

$

95,560

Reversal of non-GAAP expenses

Stock-based compensation (a)

2,230

980

7,690

4,094

Amortization of intangible assets (b)

709

282

2,409

1,193

Non-GAAP gross profit

$

31,715

$

26,134

$

116,896

$

100,847

Percentage of revenue

61.6

%

63.0

%

60.4

%

62.6

%

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

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

GAAP subscription gross profit

$

24,756

$

21,093

$

92,515

$

81,723

Reversal of non-GAAP expenses

Stock-based compensation (a)

1,114

436

3,658

1,865

Amortization of intangible assets (b)

709

282

2,409

1,193

Non-GAAP subscription gross profit

$

26,579

$

21,811

$

98,582

$

84,781

Percentage of subscription revenue

69.6

%

73.5

%

69.2

%

73.0

%

Model N, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results

(in thousands, except per share amounts)



Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Reconciliation from GAAPnet loss to adjusted EBITDA

GAAP net loss $ (6,069 ) $ (3,657 ) $ (29,737 ) $ (13,664 )

Reversal of non-GAAP items

Stock-based compensation 8,113 5,268 29,963 22,500 expense

Depreciation and 2,232 1,335 7,972 5,498 amortization

Acquisition-related - - 2,509 - expense

Interest expense, net 3,699 3,371 14,344 6,322

Other expenses (income), 35 347 210 (76 )net

Provision for (benefit (71 ) 302 769 812 from) income taxes

Adjusted EBITDA $ 7,939 $ 6,966 $ 26,030 $ 21,392



Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Reconciliation from GAAPgross profit to non-GAAP gross profit

GAAP gross profit $ 28,776 $ 24,872 $ 106,797 $ 95,560

Reversal of non-GAAP expenses

Stock-based compensation 2,230 980 7,690 4,094 (a)

Amortization of 709 282 2,409 1,193 intangible assets (b)

Non-GAAP gross profit $ 31,715 $ 26,134 $ 116,896 $ 100,847

Percentage of revenue 61.6 % 63.0 % 60.4 % 62.6 %



Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Reconciliation from GAAPsubscription gross profit to non-GAAP subscriptiongross profit

GAAP subscription gross $ 24,756 $ 21,093 $ 92,515 $ 81,723 profit

Reversal of non-GAAP expenses

Stock-based compensation 1,114 436 3,658 1,865 (a)

Amortization of 709 282 2,409 1,193 intangible assets (b)

Non-GAAP subscription $ 26,579 $ 21,811 $ 98,582 $ 84,781 gross profit

Percentage of 69.6 % 73.5 % 69.2 % 73.0 %subscription revenue

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

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

GAAP professional services gross profit

$

4,020

$

3,779

$

14,282

$

13,837

Reversal of non-GAAP expenses

Stock-based compensation (a)

1,116

544

$

4,032

$

2,229

Non-GAAP professional services gross profit

$

5,136

$

4,323

$

18,314

$

16,066

Percentage of professional services revenue

38.6

%

36.7

%

35.9

%

35.8

%

Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Reconciliation from GAAPprofessional services grossprofit to non-GAAP professional services grossprofit

GAAP professional services $ 4,020 $ 3,779 $ 14,282 $ 13,837 gross profit

Reversal of non-GAAP expenses

Stock-based compensation (a) 1,116 544 $ 4,032 $ 2,229

Non-GAAP professional $ 5,136 $ 4,323 $ 18,314 $ 16,066 services gross profit

Percentage of professional 38.6 % 36.7 % 35.9 % 35.8 %services revenue

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Reconciliation from GAAP operating income (loss) to non-GAAP operating income

GAAP operating income (loss)

$

(2,406

)

$

363

$

(14,414

)

$

(6,606

)

Reversal of non-GAAP expenses

Stock-based compensation (a)

8,113

5,268

29,963

22,500

Amortization of intangible assets (b)

2,008

1,171

7,196

4,751

Acquisition-related expense (c)

-

-

2,509

-

Non-GAAP operating income

$

7,715

$

6,802

$

25,254

$

20,645

Numerator

Reconciliation between GAAP net loss and non-GAAP net income

GAAP net loss

$

(6,069

)

$

(3,657

)

$

(29,737

)

$

(13,664

)

Reversal of non-GAAP expenses

Stock-based compensation (a)

8,113

5,268

29,963

22,500

Amortization of intangible assets (b)

2,008

1,171

7,196

4,751

Acquisition-related expense (c)

-

-

2,509

-

Amortization of debt discount and issuance costs (d)

2,577

2,287

9,863

3,405

Non-GAAP net income

$

6,629

$

5,069

$

19,794

$

16,992

Denominator

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

Shares used in computing GAAP net loss per share:

Basic

35,921

34,684

35,461

34,008

Diluted

35,921

34,684

35,461

34,008

Shares used in computing non-GAAP net income per share

Basic

35,921

34,684

35,461

34,008

Diluted

36,475

36,413

36,542

35,366

GAAP net loss per share

Basic and diluted

$

(0.17

)

$

(0.11

)

$

(0.84

)

$

(0.40

)

Non-GAAP net income per share

Basic

$

0.18

$

0.15

$

0.56

$

0.50

Diluted

$

0.18

$

0.14

$

0.54

$

0.48

Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Reconciliation from GAAPoperating income (loss) to non-GAAP operatingincome

GAAP operating income $ (2,406 ) $ 363 $ (14,414 ) $ (6,606 )(loss)

Reversal of non-GAAP expenses

Stock-based compensation 8,113 5,268 29,963 22,500 (a)

Amortization of 2,008 1,171 7,196 4,751 intangible assets (b)

Acquisition-related - - 2,509 - expense (c)

Non-GAAP operating income $ 7,715 $ 6,802 $ 25,254 $ 20,645



Numerator

Reconciliation betweenGAAP net loss and non-GAAP net income

GAAP net loss $ (6,069 ) $ (3,657 ) $ (29,737 ) $ (13,664 )

Reversal of non-GAAP expenses

Stock-based compensation 8,113 5,268 29,963 22,500 (a)

Amortization of 2,008 1,171 7,196 4,751 intangible assets (b)

Acquisition-related - - 2,509 - expense (c)

Amortization of debtdiscount and issuance 2,577 2,287 9,863 3,405 costs (d)

Non-GAAP net income $ 6,629 $ 5,069 $ 19,794 $ 16,992



Denominator

Reconciliation betweenGAAP and non-GAAP net income (loss) per share

Shares used in computing GAAP net loss per share:

Basic 35,921 34,684 35,461 34,008

Diluted 35,921 34,684 35,461 34,008

Shares used in computingnon-GAAP net income per share

Basic 35,921 34,684 35,461 34,008

Diluted 36,475 36,413 36,542 35,366

GAAP net loss per share

Basic and diluted $ (0.17 ) $ (0.11 ) $ (0.84 ) $ (0.40 )

Non-GAAP net income per share

Basic $ 0.18 $ 0.15 $ 0.56 $ 0.50

Diluted $ 0.18 $ 0.14 $ 0.54 $ 0.48

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Amortization of intangibles assets recorded in the statements of operations

Cost of revenues

Subscription

$

709

$

282

$

2,409

$

1,193

Professional services

-

-

-

-

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

709

282

2,409

1,193

Operating expenses

Research and development

-

-

-

-

Sales and marketing

1,299

889

4,787

3,558

General and administrative

-

-

-

-

Total amortization of intangibles assets in operating expense (b)

1,299

889

4,787

3,558

Total amortization of intangibles assets (b)

$

2,008

$

1,171

$

7,196

$

4,751

Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Stock-based compensation recorded in the statements of operations

Cost of revenues

Subscription

$

1,114

$

436

$

3,658

$

1,865

Professional services

1,116

544

4,032

2,229

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

2,230

980

7,690

4,094

Operating expenses

Research and development

1,531

882

6,051

4,625

Sales and marketing

1,930

1,571

7,541

6,160

General and administrative

2,422

1,835

8,681

7,621

Total stock-based compensation in operating expense (a)

5,883

4,288

22,273

18,406

Total stock-based compensation (a)

$

8,113

$

5,268

$

29,963

$

22,500

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, acquisition-related expense, and amortization of debt discount and issuance costs 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 income (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:

Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Amortization of intangiblesassets recorded in the statements of operations

Cost of revenues

Subscription $ 709 $ 282 $ 2,409 $ 1,193

Professional services - - - -

Total amortization ofintangibles assets in cost of 709 282 2,409 1,193 revenue (b)

Operating expenses

Research and development - - - -

Sales and marketing 1,299 889 4,787 3,558

General and administrative - - - -

Total amortization ofintangibles assets in 1,299 889 4,787 3,558 operating expense (b)

Total amortization of $ 2,008 $ 1,171 $ 7,196 $ 4,751 intangibles assets (b)



Three Months Ended Twelve Months Ended September 30, September 30,

2021 2020 2021 2020

Stock-based compensationrecorded in the statements of operations

Cost of revenues

Subscription $ 1,114 $ 436 $ 3,658 $ 1,865

Professional services 1,116 544 4,032 2,229

Total stock-basedcompensation in cost of 2,230 980 7,690 4,094 revenue (a)

Operating expenses

Research and development 1,531 882 6,051 4,625

Sales and marketing 1,930 1,571 7,541 6,160

General and administrative 2,422 1,835 8,681 7,621

Total stock-basedcompensation in operating 5,883 4,288 22,273 18,406 expense (a)

Total stock-based $ 8,113 $ 5,268 $ 29,963 $ 22,500 compensation (a)

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, acquisition-related expense, and amortization of debt discount and issuance costs 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 income (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:

Stock-based compensation is a non-cash expense accounted for in accordance(a) 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.



Amortization of intangible assets resulted principally from acquisitions.(b) 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.



Acquisition-related expense. Acquisition-related expense is incurred in connection with the acquisition and is non-recurring. As such, we believe(c) that exclusion of these acquisition-related expense provides for a better comparison of our operation results to prior periods and to our peer companies.



Amortization of debt discount and issuance costs. Amortization of debt(d) discount and issuance costs 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.

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CONTACT: Investor Relations Contact:

CONTACT: Carolyn Bass Market Street Partners investorrelations@modeln.com

CONTACT: Media Contact:

CONTACT: Judith Rich Model N, Inc. 516-884-6879 jrich@modeln.com