Model N Inc. (MODN, Financial) has seen its market value rise more than 32% in the last 12 months despite the difficult economic climate for many software companies. This growth can be attributed to increased demand for Model N's products and services. The company has strong potential for growth that is not being dampened by the bear market, and it is expected to continue to perform well in 2023 aided by its adaptable business model and strong cash flows.
Model N is a provider of cloud-based revenue management solutions for life sciences companies, semiconductor manufacturers and high-technology companies. The company’s solutions help its clients manage their revenue, including pricing, contracting and compliance processes. Although Model N has yet to become profitable, I still believe it is worth monitoring closely; here's why.
Innovation is a key growth driver
With an increasing number of businesses moving online, companies are facing difficulties managing their revenue with legacy systems while also complying with strict regulations. To tackle this complexity, they seek more efficient and cost-effective solutions.
Model N's cloud-based revenue management offerings are well-suited to meet the needs of these industries. Its solutions deliver a higher return on investment and fill the gaps in end-to-end revenue management that legacy systems fail to address, paving the way for its clients to achieve operational efficiencies. The company is at the forefront of cloud-based revenue management with its specialized applications for configuration, pricing, rebate management and regulatory compliance.
To keep up with market demand, Model N continues to invest in its products. In 2022, the company launched the Model N Revenue Cloud, which features a new payment management solution for high-tech companies and upgrades to its Global Price Management mobile app for pharmaceutical and MedTech companies. The updates streamline payments, improve transparency and remove manual processes by consolidating and lowering payment fees and reducing resource overhead. The new solution also simplifies and automates the integration of point-of-sale files with Channel Data Management, making it easier to integrate channel sales data. CDM provides new operational insights and the ability to monitor partner sales and inventory, ensuring compliance.
The Model N Revenue Cloud aims to improve automation and ease of use for U.S. pharmaceutical companies in key areas such as formulary compliance and script validation. For MedTech manufacturers, Model N focuses on automating operations and delivering new, specialized functionality to improve revenue recognition through enhanced GL-account code visibility and advanced rebate calculations. Its Global Pricing Management application now addresses trade risks from parallel trade and enables reference pricing activities as well. The GPM app for mobile devices has been enhanced with improved usability and automation, including targeted functionality for fulfilling orders, automating complex rebates and providing valuable reporting for sales professionals.
In November 2022, Model N updated its Revenue Cloud to bring innovative solutions for optimizing revenue and ensuring compliance for life sciences and high-tech customers. The latest enhancements for pharmaceutical and MedTech companies help them comply and better forecast the impact of drug patents on revenue and pricing, receive and process recent payer, prescriber and government data standards and calculate Medicaid rebates accurately. By having better control over contract pricing communication with internal and external parties, these companies can ensure they deliver the right products to the right providers at the right prices.
For tech companies, the updated Revenue Cloud provides a 25% improvement in rebate calculation for large amounts of data, making it easier to handle more partners. Companies can now make price changes faster, which is important given the current economic conditions. Customers will have more control over automating channel data, allowing them to manage and reconcile data on their own. These updates are important for customers who need to respond quickly to changes in the market.
Industry and competitive landscape
According to Future Market Insights, the revenue management software market is projected to grow at a compounded annual growth rate of around 12.3% through 2032.
The increasing demand for efficient revenue management solutions is a major driver as companies look to improve the accuracy and visibility of their financial data. The need for automation and digitalization of business processes is also growing, driven by the desire to reduce manual errors and inefficiencies. Compliance requirements and regulations are becoming more stringent, driving the need for robust revenue management solutions. The adoption of cloud-based technology and the growing popularity of Software-as-a-Service solutions are also contributing to the growth of the market. The expansion of e-commerce and online transactions is driving the demand for better management of revenue streams. Lastly, the growing demand for real-time reporting and analytics to support strategic decision-making is also fueling the growth of the revenue management software market.
Model N faces competition from other revenue management solution providers, including established companies and new entrants. Some of its main competitors are Vistex Inc., Apttus, Revitas Inc., Zuora (ZUO, Financial) and Anaplan. Model N sets itself apart by specializing in the life sciences and technology industries, offering cloud-based solutions and having extensive knowledge of revenue management processes. The company has potential for growth as it capitalizes on the underserved market for revenue management and replaces outdated, time-consuming, inaccurate and expensive legacy processes.
Takeaway
Model N operates in the large and growing market for revenue management solutions and offers a compelling value proposition to its target customers in the life sciences and high-tech industries. The company has a cloud-based delivery model and a focus on serving the unique needs of these industries, which sets it apart from many of its competitors.
The company has a proven track record of delivering solutions that provide a high return on investment and improved top-line growth for its customers. Furthermore, the shift to cloud-based solutions and the increasing complexity of regulatory compliance and revenue management processes provide a tailwind for Model N. I believe these factors make the company an attractive growth opportunity for those seeking exposure to the revenue management solutions market.
