EX-99.1 2 modnq421ex991.htm EX-99.1 Document

Exhibit 99.1

MODEL N ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2021 FINANCIAL RESULTS

•Total Q4 Revenue Grew 24% Year-over-Year
•Q4 Subscription Revenue Grew 29% Year-over-Year

SAN MATEO, Calif. – November 9, 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.
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•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.

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(in $ millions, except per share)First Quarter Fiscal 2022Full Year Fiscal 2022
Total revenues49.5 – 50.0211.0 – 214.0
Subscription revenues37.0 – 37.5152.0 – 155.0
Non-GAAP income from operations4.3 – 4.822.0 – 24.0
Non-GAAP net income per share0.08 – 0.090.44 – 0.49
Adjusted EBITDA4.5 – 5.023.0 – 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
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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.

# # #

Investor Relations Contact:

Carolyn Bass
Market Street Partners
investorrelations@modeln.com

Media Contact:

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



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Model N, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
As of
September 30, 2021		As of
September 30, 2020
Assets  
Current assets  
Cash and cash equivalents$165,467 $200,491 
Funds held for customers316 — 
Accounts receivable, net43,185 35,796 
Prepaid expenses4,920 2,797 
Other current assets8,442 7,314 
Total current assets222,330 246,398 
Property and equipment, net1,907 1,034 
Operating lease right-of-use assets20,565 3,332 
Goodwill65,665 39,283 
Intangible assets, net45,394 24,380 
Other assets7,929 5,863 
Total assets$363,790 $320,290 
Liabilities and Stockholders’ Equity  
Current liabilities  
Accounts payable$4,802 $3,009 
Customer funds payable316 — 
Accrued employee compensation24,662 17,056 
Accrued liabilities4,719 5,237 
Operating lease liabilities, current portion4,529 1,460 
Deferred revenue, current portion57,431 50,904 
Total current liabilities96,459 77,666 
Long-term liabilities  
Long term debt124,301 114,438 
Operating lease liabilities, less current portion17,229 2,067 
Other long-term liabilities2,283 1,448 
Total long-term liabilities143,813 117,953 
Total liabilities240,272 195,619 
Stockholders’ equity  
Common stock5 5 
Preferred stock— — 
Additional paid-in capital380,528 351,952 
Accumulated other comprehensive loss(1,205)(1,213)
Accumulated deficit(255,810)(226,073)
Total stockholders’ equity123,518 124,671 
Total liabilities and stockholders’ equity$363,790 $320,290 

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Model N, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
 Three Months Ended September 30,Twelve Months Ended September 30,
 2021202020212020
Revenues  
Subscription$38,164 $29,672 $142,448 $116,184 
Professional services13,317 11,788 50,997 44,872 
Total revenues51,481 41,460 193,445 161,056 
Cost of revenues
Subscription13,408 8,579 49,933 34,461 
Professional services9,297 8,009 36,715 31,035 
Total cost of revenues22,705 16,588 86,648 65,496 
Gross profit28,776 24,872 106,797 95,560 
Operating expenses
Research and development11,795 8,455 44,661 34,361 
Sales and marketing11,128 9,297 43,239 38,979 
General and administrative8,259 6,757 33,311 28,826 
Total operating expenses31,182 24,509 121,211 102,166 
Income (loss) from operations(2,406)363 (14,414)(6,606)
Interest expense, net3,699 3,371 14,344 6,322 
Other expenses (income), net35 347 210 (76)
Loss before income taxes(6,140)(3,355)(28,968)(12,852)
Provision for (benefit from) income taxes(71)302 769 812 
Net loss$(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 diluted35,921 34,684 35,461 34,008 

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Model N, Inc.
Condensed Consolidated Statements of Cash Flows  
(in thousands)
 
 Twelve Months Ended September 30,
 20212020
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 amortization7,972 5,498 
Stock-based compensation29,963 22,500 
Amortization of debt discount and issuance costs9,863 3,405 
Deferred income taxes95 389 
Amortization of capitalized contract acquisition costs3,114 2,459 
Loss on early extinguishment of debt— 319 
Other non-cash charges10 (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 payable1,695 544 
Accrued employee compensation1,933 927 
Other current and long-term liabilities(2,003)(2,433)
Deferred revenue4,451 6,393 
Net cash provided by operating activities19,590 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 payable316 — 
Net cash provided by financing activities4,623 125,893 
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 period200,491 60,780 
End of period$165,783 $200,491 

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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,
 2021202020212020
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 expense8,113 5,268 29,963 22,500 
Depreciation and amortization2,232 1,335 7,972 5,498 
Acquisition-related expense— — 2,509 — 
Interest expense, net3,699 3,371 14,344 6,322 
Other expenses (income), net35 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,
 2021202020212020
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 revenue61.6 %63.0 %60.4 %62.6 %
 Three Months Ended September 30,Twelve Months Ended September 30,
 2021202020212020
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 revenue69.6 %73.5 %69.2 %73.0 %

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Three Months Ended September 30,Twelve Months Ended September 30,
2021202020212020
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 revenue38.6 %36.7 %35.9 %35.8 %

 Three Months Ended September 30,Twelve Months Ended September 30,
 2021202020212020
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 $16,992 
Denominator    
Reconciliation between GAAP and non-GAAP net income (loss) per share    
Shares used in computing GAAP net loss per share:
Basic35,921 34,684 35,461 34,008 
Diluted35,921 34,684 35,461 34,008 
Shares used in computing non-GAAP net income per share
Basic35,921 34,684 35,461 34,008 
Diluted36,475 36,413 36,542 35,366 
GAAP net loss per share
Basic and diluted$(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 
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 Three Months Ended September 30,Twelve Months Ended September 30,
 2021202020212020
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 marketing1,299 889 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,
 2021202020212020
Stock-based compensation recorded in the statements of operations    
Cost of revenues    
Subscription $1,114 $436 $3,658 $1,865 
Professional services1,116 544 4,032 2,229 
Total stock-based compensation in cost of revenue (a)2,230 980 7,690 4,094 
Operating expenses   
Research and development1,531 882 6,051 4,625 
Sales and marketing1,930 1,571 7,541 6,160 
General and administrative2,422 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.

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

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