# EDGAR Filing Document

**Accession Number:** 0001118417
**File Stem:** 0001118417-23-000013
**Filing Date:** 2023-2
**Character Count:** 38070
**Document Hash:** f4d421b89f6ff17fa925910969708322
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001118417-23-000013.hdr.sgml**: 20230207

**ACCESSION NUMBER**: 0001118417-23-000013

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 13

**CONFORMED PERIOD OF REPORT**: 20230207

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230207

**DATE AS OF CHANGE**: 20230207

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** MODEL N, INC.
- **CENTRAL INDEX KEY:** 0001118417
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370]
- **IRS NUMBER:** 770528806
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0930

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35840
- **FILM NUMBER:** 23595195

**BUSINESS ADDRESS:**
- **STREET 1:** 777 MARINERS ISLAND BOULEVARD
- **STREET 2:** SUITE 300
- **CITY:** SAN MATEO
- **STATE:** CA
- **ZIP:** 94404
- **BUSINESS PHONE:** (650) 610-4600

**MAIL ADDRESS:**
- **STREET 1:** 777 MARINERS ISLAND BOULEVARD
- **STREET 2:** SUITE 300
- **CITY:** SAN MATEO
- **STATE:** CA
- **ZIP:** 94404

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MODEL T1 INC
- **DATE OF NAME CHANGE:** 20001031

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MODEL N INC
- **DATE OF NAME CHANGE:** 20000707

?xml version="1.0" ? modn-20230207

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 8-K** 

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of**

**the Securities Exchange Act of 1934**

**February 7, 2023** 

**Date of Report (Date of earliest event reported)**

**MODEL N, INC.** 

**(Exact name of Registrant as Specified in Its Charter)**

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-35840** | **77-0528806** |
| **(State or Other Jurisdiction<br>of Incorporation)** | **(Commission<br>File Number)** | **(IRS Employer Identification No.)** |

---

**777 Mariners Island Boulevard, Suite 300 San Mateo, California 94404** 

**(Address of Principal Executive Offices) (Zip Code)** 

**Registrant's Telephone Number, Including Area Code: (**650**) 610-4600** 

**Not Applicable**

**(Former Name or Former Address, if Changed Since Last Report)**

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol** | **Name of each exchange on which registered** |
| Common Stock, par value $0.00015 per share | MODN | New York Stock Exchange |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

------

**Item 2.02.&nbsp;&nbsp;&nbsp;&nbsp;Results of Operations and Financial Condition.**

On February 7, 2023, the Company issued a press release announcing its financial results for the first quarter fiscal year 2023, which ended December 31, 2022. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K.

The information contained in this Item 2.02 of this current report on Form 8-K and the exhibits attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

**Item 9.01.&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements and Exhibits.**

(d)&nbsp;&nbsp;&nbsp;&nbsp;Exhibits

The following exhibits are furnished herewith:

---

| | |
|:---|:---|
| **Exhibit Number** | **Description** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.1 | <u>[Press Release entitled "Model N Announces](modnq123ex991.htm)[First](modnq123ex991.htm)[Quarter Fiscal Year 202](modnq123ex991.htm)[3](modnq123ex991.htm)[Financial Results," dated](modnq123ex991.htm)[February](modnq123ex991.htm)[7](modnq123ex991.htm)[, 20](modnq123ex991.htm)[23](modnq123ex991.htm)</u>. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**

&nbsp;&nbsp;&nbsp;&nbsp;

------

**SIGNATURES**

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | |
|:---|:---|
| MODEL N, INC. | MODEL N, INC. |
| (Registrant) | (Registrant) |
| By: | /s/ John Ederer |
|  | John Ederer |
|  | Chief Financial Officer |

---

Date: February 7, 2023

## Exhibit 99.1

**Exhibit 99.1**

**MODEL N ANNOUNCES FIRST QUARTER FISCAL YEAR 2023 FINANCIAL RESULTS**

***Total Revenue Grew 15% Year-over-Year***

***SaaS ARR Grew 36% Year-over-Year***

***Net Loss Decreased 35% Year-over-Year***

***Adjusted EBITDA Grew 27% Year-over-Year***

SAN MATEO, Calif. – February 7, 2023 - Model N, Inc. (NYSE: MODN), the leader in cloud revenue management solutions, today announced financial results for the first quarter of fiscal year 2023 ended December 31, 2022.

"I am very proud of our team for the strong first quarter results. During the quarter, we signed new logos, closed another significant SaaS transition, expanded within numerous existing customers, and enjoyed strong renewals. Our SaaS ARR grew by 36% year-over-year to reach an all-time high," said Jason Blessing, president and chief executive officer of Model N. "As we look ahead, we continue to remain focused on driving profitable growth and I'm optimistic about the year ahead."

**<u>Recent Highlights</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Released the results of its fifth annual State of Revenue Report capturing detailed data intended to help life sciences and high-tech industry executives grappling with how to grow company revenue and market share.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Introduced the Fall 2022 product release of the Model N Revenue Cloud. This latest semi-annual update focuses on bringing innovative revenue optimization and compliance solutions for life sciences and high-tech customers, informed by market shifts, customer feedback, and the continuous pursuit of marketplace excellence.

**<u>First Quarter 2023 Financial Highlights</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Revenues**: Total revenues were $59.2 million, an increase of 15% from the first quarter of fiscal year 2022. Subscription revenues were $44.2 million, an increase of 16% from the first quarter of fiscal year 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Gross Profit**: Gross profit was $32.9 million, an increase of 14% from the first quarter of fiscal year 2022. Gross margin was 56% for the first quarter of fiscal year 2023 and 2022. Non-GAAP gross profit was $36.1 million, an increase of 16% from the first quarter of fiscal year 2022. Non-GAAP gross margin was 61% compared to 60% for the first quarter of fiscal year 2022. Subscription gross margin was 65% compared to 63% for the first quarter of fiscal year 2022. Non-GAAP subscription gross margin was 69% compared to 68% for the first quarter of fiscal year 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **GAAP Loss and Non-GAAP Income from Operations**: GAAP loss from operations was $3.5 million compared to loss from operations of $2.0 million for the first quarter of fiscal year 2022. Non-GAAP income from operations was $8.9 million, an increase of 27% from the first quarter of fiscal year 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **GAAP Net Loss**: GAAP net loss was $4.1 million compared to a net loss of $6.3 million for the first quarter of fiscal year 2022. GAAP basic and diluted net loss per share attributable to common stockholders was $0.11 based upon weighted average shares outstanding of 37.5 million compared to net loss per share of $0.17 for the first quarter of fiscal year 2022 based upon weighted average shares outstanding of 36.2 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Non-GAAP Net Income**: Non-GAAP net income, basic was $8.7 million, an increase of 61% from the first quarter of fiscal year 2022. Non-GAAP net income, diluted, was $9.8 million. Non-GAAP net income per diluted share was $0.23 based upon diluted weighted average shares outstanding of 43.3 million compared to non-GAAP net income per diluted share of $0.15 for the first quarter of fiscal year 2022 based upon diluted weighted average shares outstanding of 36.6 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Adjusted EBITDA**: Adjusted EBITDA was $9.1 million, an increase of 27% from the first quarter of fiscal year 2022. Adjusted EBITDA margin was 15% compared to 14% for the first quarter of fiscal year 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **SaaS ARR and SaaS Net Dollar Retention:** SaaS ARR hit $115.8 million, as growth accelerated to 36% year-over-year. Trailing 12-month SaaS net dollar retention increased to 134% from 129% in the prior quarter.

------

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

------

**<u>Guidance</u>**

As of February 7, 2023, we are providing guidance for the second quarter fiscal year 2023 ending March 31, 2023 and the full fiscal year ending September 30, 2023.

---

| | | |
|:---|:---|:---|
| *(in $ millions, except per share)* | **Second Quarter Fiscal 2023** | **Full Year Fiscal 2023** |
| Total revenues | 59.0 - 60.0 | 242.0 - 245.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subscription revenues | 43.5 - 44.0 | 179.0 - 181.0 |
| Non-GAAP income from operations | 5.8 - 6.8 | 36.0 - 39.0 |
| Non-GAAP net income per share | 0.15 - 0.18 | 0.90 - 0.97 |
| Adjusted EBITDA | 6.0 - 7.0 | 37.0 - 40.0 |

---

**<u>Quarterly Results Conference Call</u>**

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 first quarter fiscal year 2023 ended December 31, 2022. The conference call can be accessed by dialing 877-407-4018 from the United States or +1-201-689-8471 internationally. A live webcast and replay of the conference call can be accessed from the investor relations page of Model N's website at <u>investor.modeln.com</u>. Following the completion of the call through 11:59 p.m. ET on February 21, 2023, 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 13735134.

**<u>About Model N</u>**

Model N is the 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 <u>www.modeln.com</u>.

**<u>Forward-Looking Statements</u>**

This press release contains forward-looking statements including, among other things, statements regarding Model N's first quarter and full year fiscal 2023 financial results, Model N's profitability, future planned enhancements to our products and benefits from our products. 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; and (xiii) adverse impacts on our business and financial condition due to macroeconomic and geopolitical factors, such as inflation, rising interests, pandemics and geopolitical conflicts. 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, 2022, 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.

**<u>Non-GAAP Financial Measures</u>**

------

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, and amortization of debt discount and issuance costs. 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 expense, net, other (income) expenses, net, and provision for income taxes. 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 both 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 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.

**Investor Relations Contact:**

Carolyn Bass

Market Street Partners

investorrelations@modeln.com

**Media Contact:**

BLASTmedia

Press@modeln.com

------

**Model N, Inc.**

**Condensed Consolidated Balance Sheets**

*(in thousands)*

---

| | | |
|:---|:---|:---|
| | **As of December 31, 2022** | **As of September 30, 2022** |
| **Assets** | | |
| Current assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $175194 | $193524 |
| &nbsp;&nbsp;&nbsp;&nbsp;Funds held for customers | 134 | 603 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 66118 | 49121 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 5137 | 5772 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current assets | 14209 | 12516 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 260792 | 261536 |
| Property and equipment, net | 1566 | 1838 |
| Operating lease right-of-use assets | 13175 | 15392 |
| Goodwill | 65665 | 65665 |
| Intangible assets, net | 35354 | 37362 |
| Other assets | 10277 | 10454 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $386829 | $392247 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $5040 | $5820 |
| &nbsp;&nbsp;&nbsp;&nbsp;Customer funds payable | 134 | 603 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued employee compensation | 11014 | 26712 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 3621 | 6860 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, current portion | 4586 | 4651 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue, current portion | 67081 | 62282 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 91476 | 106928 |
| Long-term liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Long term debt | 169439 | 135417 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, less current portion | 10013 | 12142 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other long-term liabilities | 3364 | 3139 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities | 182816 | 150698 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 274292 | 257626 |
| Stockholders' equity |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common stock | 6 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 381733 | 421473 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (2214) | (2413) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (266988) | (284445) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 112537 | 134621 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $386829 | $392247 |

---

------

**Model N, Inc.**

**Condensed Consolidated Statements of Operations**

*(in thousands, except per share amounts)*

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Revenues |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Subscription | $44214 | $38088 |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional services | 14940 | 13454 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 59154 | 51542 |
| Cost of revenues |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Subscription | 15606 | 13916 |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional services | 10665 | 8735 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenues | 26271 | 22651 |
| Gross profit | 32883 | 28891 |
| Operating expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 12764 | 11427 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 12977 | 11039 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 10691 | 8439 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 36432 | 30905 |
| Loss from operations | (3549) | (2014) |
| Interest expense, net | 134 | 3778 |
| Other expenses (income), net | (65) | 100 |
| Loss before income taxes | (3618) | (5892) |
| Provision for income taxes | 432 | 374 |
| Net loss | $(4050) | $(6266) |
| Net loss per share: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | $(0.11) | $(0.17) |
| Weighted average number of shares used in computing net loss per share: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | 37527 | 36223 |

---

------

**Model N, Inc.**

**Condensed Consolidated Statements of Cash Flows** 

*(in thousands)*

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Cash Flows from Operating Activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(4050) | $(6266) |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2273 | 2240 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 10404 | 6986 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount and issuance costs | 302 | 2655 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | 157 | 158 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of capitalized contract acquisition costs | 1196 | 982 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-cash charges | 56 | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in assets and liabilities, net of acquisition |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (17080) | (6499) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 43 | 1202 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (775) | (2229) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued employee compensation | (10630) | (8367) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current and long-term liabilities | (4961) | (1542) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 4773 | 955 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | (18292) | (9685) |
| Cash Flows from Investing Activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment | (26) | (325) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (26) | (325) |
| Cash Flows from Financing Activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options and issuance of common stock under employee stock purchase<br>plan | 27 | 72 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net changes in customer funds payable | (469) | 276 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | (442) | 348 |
| Effect of exchange rate changes on cash and cash equivalents | (39) | (16) |
| Net decrease in cash and cash equivalents | (18799) | (9678) |
| Cash and cash equivalents |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Beginning of period | 194127 | 165783 |
| &nbsp;&nbsp;&nbsp;&nbsp;End of period | $175328 | $156105 |

---

------

---

| | | |
|:---|:---|:---|
| **Model N, Inc.** | **Model N, Inc.** | **Model N, Inc.** |
| **Reconciliation of GAAP to Non-GAAP Operating Results** | **Reconciliation of GAAP to Non-GAAP Operating Results** | **Reconciliation of GAAP to Non-GAAP Operating Results** |
| *(in thousands, except per share amounts)* | *(in thousands, except per share amounts)* | *(in thousands, except per share amounts)* |
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
|  | **2022** | **2021** |
| Reconciliation from GAAP net loss to adjusted EBITDA |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;GAAP net loss | $(4050) | $(6266) |
| &nbsp;&nbsp;&nbsp;&nbsp;Reversal of non-GAAP items |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 10404 | 6986 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2273 | 2240 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense, net | 134 | 3778 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expenses (income), net | (65) | 100 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | 432 | 374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA | $9128 | $7212 |
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
|  | **2022** | **2021** |
| Reconciliation from GAAP gross profit to non-GAAP gross profit |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;GAAP gross profit | $32883 | $28891 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reversal of non-GAAP expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation (a) | 2477 | 1479 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets (b) | 709 | 709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP gross profit | $36069 | $31079 |
| &nbsp;&nbsp;&nbsp;&nbsp;Percentage of revenue | 61.0% | 60.3% |
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
|  | **2022** | **2021** |
| Reconciliation from GAAP subscription gross profit to non-GAAP subscription gross profit |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;GAAP subscription gross profit | $28608 | $24172 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reversal of non-GAAP expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation (a) | 1337 | 858 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets (b) | 709 | 709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP subscription gross profit | $30654 | $25739 |
| &nbsp;&nbsp;&nbsp;&nbsp;Percentage of subscription revenue | 69.3% | 67.6% |

---

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Reconciliation from GAAP professional services gross profit to non-GAAP professional services gross profit |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;GAAP professional services gross profit | $4275 | $4719 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reversal of non-GAAP expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation (a) | $1140 | $621 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP professional services gross profit | $5415 | $5340 |
| &nbsp;&nbsp;&nbsp;&nbsp;Percentage of professional services revenue | 36.2% | 39.7% |

---

------

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Reconciliation from GAAP operating loss to non-GAAP operating income |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;GAAP operating loss | $(3549) | $(2014) |
| &nbsp;&nbsp;&nbsp;&nbsp;Reversal of non-GAAP expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation (a) | 10404 | 6986 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets (b) | 2008 | 2008 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP operating income | $8863 | $6980 |
| **Numerator** |  |  |
| Reconciliation between GAAP net loss and non-GAAP net income |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;GAAP net loss | $(4050) | $(6266) |
| &nbsp;&nbsp;&nbsp;&nbsp;Reversal of non-GAAP expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation (a) | 10404 | 6986 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets (b) | 2008 | 2008 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount and issuance costs (c) | 302 | 2655 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP net income - basic | $8664 | $5383 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Interest expense on convertible notes\* | 1132 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP net income - diluted | $9796 |  |
| **Denominator** |  |  |
| Reconciliation between GAAP net loss and non-GAAP net income per share |  |  |
| Shares used in computing GAAP net loss per share: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 37527 | 36223 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 37527 | 36223 |
| Shares used in computing non-GAAP net income per share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 37527 | 36223 |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: effect of shares for stock plan activity | 622 | 356 |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: effect of shares related to convertible senior notes\* | 5176 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 43325 | 36578 |
| GAAP net loss per share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | $(0.11) | $(0.17) |
| Non-GAAP net income per share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $0.23 | $0.15 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $0.23 | $0.15 |

---

\*Beginning October 1, 2022, includes the impact of adoption of accounting pronouncement (ASU 2020-06). Under the new standard, the Company is required to reflect dilutive effect of the Convertible Notes by application of the if-converted method.

------

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Amortization of intangibles assets recorded in the statements of operations |  |  |
| Cost of revenues |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Subscription | $709 | $709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total amortization of intangibles assets in cost of revenue (b) | 709 | 709 |
| Operating expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 1299 | 1299 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total amortization of intangibles assets in operating expense (b) | 1299 | 1299 |
| Total amortization of intangibles assets (b) | $2008 | $2008 |

---

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Stock-based compensation recorded in the statements of operations |  |  |
| Cost of revenues |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Subscription | $1337 | $858 |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional services | 1140 | 621 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stock-based compensation in cost of revenue (a) | 2477 | 1479 |
| Operating expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 1821 | 1281 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 2388 | 1620 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 3718 | 2606 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stock-based compensation in operating expense (a) | 7927 | 5507 |
| Total stock-based compensation (a) | $10404 | $6986 |

---

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** |
| | **2022** | **2021** |
| Free cash flow |  |  |
| Net cash provided by operating activities | $(18292) | $(9685) |
| Purchases of property and equipment | (26) | (325) |
| &nbsp;&nbsp;&nbsp;Free cash flow | $(18318) | $(10010) |

---

***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, 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 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 discount and issuance costs. Prior to the adoption of ASU 2020-06, Debt with Conversion and Other Options, on October 1, 2022 we were required to recognize non-cash interest expense related to amortization of debt discount and issuance costs. Subsequent to the adoption of ASU 2020-06, Debt with Conversion and Other Options, we only recognize non-cash interest expense related to amortization of 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. Additionally, effective October 1, 2022 for purposes of calculating diluted Non-GAAP net income per share, we add back cash interest expense on convertible senior notes, as if-converted at the beginning of the period, if the impact is dilutive.

<br>