Medidata Solutions Reports Record First Quarter 2013 Results

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Medidata Solutions Reports Record First Quarter 2013 Results

  • Record revenues of $63.3 million, a 26% year-over-year increase
  • Record application services revenue of $50.7 million, a 32% year-over-year increase
  • Raises 2013 revenue guidance to between $270 and $274 million

NEW YORK--(BUSINESS WIRE)-- Medidata Solutions (NAS: MDSO) , the leading global provider of cloud-based solutions for the life sciences industry, today announced its financial results for the first quarter 2013 and provided detailed financial guidance.


"With Medidata's customers increasingly relying on our Clinical Cloud platform, we had an impressive first quarter, and have set the foundation for strong performance in the remainder of 2013," said Tarek Sherif, Medidata's chief executive officer. "Our revenue growth is accelerating, our backlog is showing meaningful growth and our customer and revenue retention rates are impressive, all of which are indicative of the attractiveness of our platform and business model. Life science companies are rapidly moving to the cloud and away from the legacy, on-premise solutions offered by our competitors. We expect to continue to be the primary beneficiary of this transition, building value for our customers and shareholders."

First Quarter 2013 Results

  • Total revenues for the first quarter of 2013 were $63.3 million, an increase of $12.9 million, or 26%, compared with $50.4 million in 2012. Application services revenue was $50.7 million, an increase of 32% compared with the same period last year.
  • GAAP operating income for the quarter increased to $7.1 million, up 16%, compared with $6.1 million a year ago. Non-GAAP operating income* for the first quarter of 2013 increased to $14.2 million, up 37%, compared with $10.3 million a year ago.
  • GAAP net income for the first quarter of 2013 was $5.7 million, or $0.22 per diluted share, up 51%, compared with $3.8 million, or $0.15 per diluted share, in the first quarter of 2012. Adjusted non-GAAP net income* for the first quarter of 2013 was $9.1 million, or $0.35 per diluted share, up 69%, compared with $5.4 million, or $0.22 per diluted share, in the first quarter of 2012.
  • Application services backlog for the remainder of the year (remaining backlog) as of March 31, 2013, increased to $156 million, up 46% over the comparable period a year ago. This compares with a 34% increase in remaining backlog over the comparable period in the prior year. Non-Rave products account for 22% of remaining backlog.
  • Total cash, cash equivalents and marketable securities were $124.0 million at the end of the first quarter, an increase of $12.8 million as compared with $111.2 million at the end of the first quarter 2012.

Additional Highlights

  • Medidata's customer base grew to 358 in the first quarter of 2013, up 25% from the first quarter of 2012.
  • 41% of customers had committed to multiple products at the end of the first quarter of 2013 as compared with 38% at the end of the fourth quarter of 2012.
  • Non-Rave revenues increased 125% year-over-year, driven by healthy growth in Medidata's patient randomization, medical coding, safety data capture, protocol design, business analytics and trial management solutions.
  • Medidata's revenue retention rate for the quarter was 99.9%.

"Our investments are intended to enhance long-term growth and we are seeing positive signs of their impact in our results," said Cory Douglas, chief financial officer. "We are confident in our ability to drive sustained growth in 2013 and in the years to come."

Financial Outlook

For the full year 2013, the company now expects:

  • Revenues between $270.0 and $274.0 million.
  • Professional services revenues in the high $40 million range.
  • Non-GAAP operating income between $61.0 and $64.0 million. Based on current estimates, this would equate to GAAP operating income between $23.0 and $26.0 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact primarily from stock-based compensation and amortization at a 40% effective tax rate, between $31.5 and $34.5 million. Based on current estimates, this would equate to GAAP net income between $13.5 and $16.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.7 million fully diluted shares.

For the second quarter of 2013, the company expects:

  • Revenues between $65.5 and $67.0 million.
  • Non-GAAP operating income between $14.0 and $15.0 million. Based on current estimates, this would equate to GAAP operating income between $3.5 and $4.5 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact primarily from stock-based compensation and amortization at a 40% effective tax rate, between $7.0 and $8.0 million. Based on current estimates, this would equate to GAAP net income between $1.5 and $2.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.7 million fully diluted shares.

Conference Call

The company plans to host its investor conference call today at 8:00 a.m. Eastern. The investor conference call will be available via live webcast on the "Investor" section of Medidata's web site at http://investor.mdsol.com. To participate by telephone, domestic participants may dial 877-303-2528 and international participants may dial 847-829-0023. Those interested in participating in the conference call should dial in at least 10 minutes prior to the call to register. Participants can also join the call via a simultaneous live audio webcast, which will be made available on the "Investor" section of Medidata's web site at http://investor.mdsol.com. A replay of the conference call can be accessed until Monday, May 13, 2013 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 35896019. An archive of the call will also be hosted on the "Investor" section of Medidata's web site, http://investor.mdsol.com, for a limited period of time.

About Medidata Solutions Worldwide

Medidata Solutions is a leading global provider of cloud-based clinical development solutions that enhance the efficiency of customers' clinical trials. Medidata's advanced solutions lower the total cost of clinical development by optimizing clinical trials from concept to conclusion: from study and protocol design, trial planning and budgeting, site negotiation, clinical portal, trial management, randomization and trial supply management, clinical data capture and management, safety events capture, medical coding to business analytics. Our diverse life science customer base spans biopharmaceutical companies, medical device and diagnostic companies, academic and government institutions, CROs and other research organizations, and includes more than 20 of the top 25 global pharmaceutical companies as well as organizations of all sizes developing life-enhancing medical treatments and diagnostics.

Cautionary Statement

Certain statements made in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve significant risks and uncertainties about Medidata Solutions, Inc. ("Medidata"), including but not limited to statements about Medidata's forecast of financial performance, products and services, business model, strategy and growth opportunities, and competitive position. Such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in these statements. In particular, the risks and uncertainties include, among other things, risks associated with possible fluctuations in our financial and operating results; errors, interruptions or delays in our service or our Web hosting; the financial impact of any future acquisitions; our ability to continue to release, and gain customer acceptance of, new and improved versions of our products; changes in our sales and implementation cycles; competition; our ability to retain and expand our customer base or increase new business from those customers; our ability to hire, retain and motivate our employees and manage our growth; regulatory developments; litigation; and general developments in the economy. For additional disclosure regarding these and other risks faced by the company, see disclosures contained in Medidata's public filings with the Securities and Exchange Commission including, the "Risk Factors" section of Medidata's Annual Report on Form 10-K for the year ended December 31, 2012. You should consider these factors in evaluating the forward-looking statements included in this press release and not place undue reliance on such statements. The forward-looking statements are made as of the date hereof, and Medidata undertakes no obligation to update such statements as a result of new information.

*Non-GAAP Financial Information

Medidata provides Non-GAAP operating income, net income and net income per share applicable to common stockholders data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from Non-GAAP measures used by other companies. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, stock-based compensation expense, and an adjustment to the fair value of contingent consideration.Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, and an adjustment to the fair value of contingent consideration. Adjusted non-GAAP net income excludes the impact of tax-affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, and an adjustment to the fair value of contingent consideration.Management uses these Non-GAAP measures to evaluate its financial results, develop budgets, manage expenditures, and as an important factor in determining variable compensation. In addition, investors frequently have requested information from management regarding depreciation and amortization and non-cash, share-based compensation charges and management believes, based on discussions with investors, that these Non-GAAP measures enhance investors' ability to assess Medidata's historical and project future financial performance. While management believes these Non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of Non-GAAP financial measures. One limitation of Non-GAAP operating income is that it excludes depreciation and amortization, which represents the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business. Medidata compensates for these limitations by using these Non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the Non-GAAP financial measures to their most comparable GAAP financial measures. Investors are encouraged to review the reconciliations of these Non-GAAP financial measures to the comparable GAAP results, which are attached to this press release.

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
 Three Months Ended March 31,
2013 2012
Revenues
Application services$50,652$38,396
Professional services12,607 11,963 
Total revenues63,25950,359
Cost of revenues (1)(2)
Application services9,0257,484
Professional services8,104 7,131 
Total cost of revenues17,12914,615
Gross profit46,13035,744
Operating costs and expenses:
Research and development(1)11,9059,955
Sales and marketing (1)(2)14,48910,383
General and administrative (1)12,644 9,290 
Total operating costs and expenses39,038 29,628 
Operating income7,0926,116
Interest and other income (expense):
Interest expense(18)(21)
Interest income7671
Other income, net154  
Total interest and other income, net212 50 
Income before income taxes7,3046,166
Provision for income taxes1,604 2,396 
Net income$5,700 $3,770 
Earnings per share:
Basic$0.23 $0.16 
Diluted$0.22 $0.15 
Weighted average common shares outstanding:
Basic25,12024,017
Diluted26,26124,842
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues$487$295
Research and development458192
Sales and marketing1,222564
General and administrative3,038 1,103 
Total stock-based compensation$5,205 $2,154 
(2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues$281$318
Sales and marketing113 129 
Total amortization of intangible assets$394 $447 
 

 
MEDIDATA SOLUTIONS, INC.
Reconciliation of GAAP Operating Income and GAAP Net Income to

Non-GAAP Operating Income, Non-GAAP Net Income, and Adjusted Non-GAAP Net Income (Unaudited)

(Amounts in thousands, except per share data)
 Three Months Ended March 31,
2013 2012
Operating income:
GAAP operating income$7,092$6,116
GAAP operating margins11.2%12.1%
Stock-based compensation5,2052,154
Depreciation and amortization1,8511,994
Contingent consideration adjustment (1)60 80 
Non-GAAP operating income$14,208 $10,344 
Non-GAAP operating margins22.5%20.5%
Net income:
GAAP net income$5,700$3,770
Stock-based compensation5,2052,154
Amortization394447
Contingent consideration adjustment (1)60 80 
Non-GAAP net income11,3596,451
Tax impact on add-back items (2)(2,264)(1,072)
Adjusted non-GAAP net income$9,095 $5,379 
GAAP basic earnings per share$0.23 $0.16 
GAAP diluted earnings per share$0.22 $0.15 
Non-GAAP basic earnings per share$0.45 $0.27 
Non-GAAP diluted earnings per share$0.43 $0.26 
Adjusted Non-GAAP basic earnings per share$0.36 $0.22 
Adjusted Non-GAAP diluted earnings per share$0.35 $0.22 
(1) Amount represents the effect of changes in fair value of contingent consideration liability.
(2) Tax impact calculated using a 40% tax rate.
 

The table above presents a reconciliation of GAAP to non-GAAP operating income, net income, and net income per share applicable to common stockholders for the three months ended March 31, 2013 and 2012. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration. Adjusted non-GAAP net income excludes the impact of tax affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration.

 
 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except per share data)
 March 31, 2013 December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents$37,291$32,683
Marketable securities83,08689,871
Accounts receivable, net of allowance for doubtful accounts of $1,130 and $747, respectively48,39842,359
Prepaid commission expense3,1132,281
Prepaid expenses and other current assets7,7178,042
Deferred income taxes6,731 7,465 
Total current assets186,336182,701
Restricted cash388
Furniture, fixtures and equipment, net10,54210,474
Marketable securities, long-term3,655
Goodwill15,08115,382
Intangible assets, net1,2301,708
Deferred income taxes, long-term10,75211,055
Other assets2,823 2,923 
Total assets$230,419 $224,631 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$1,319$2,998
Accrued payroll and other compensation7,71614,140
Accrued expenses and other7,1346,674
Deferred revenue53,21350,348
Capital lease obligations55 55 
Total current liabilities69,437 74,215 
Noncurrent liabilities:
Deferred revenue, less current portion3,7224,323
Deferred tax liabilities293624
Capital lease obligations, less current portion86100
Other long-term liabilities2,739 3,278 
Total noncurrent liabilities6,840 8,325 
Total liabilities76,277 82,540 
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.01 per share; 5,000 shares authorized, none issued and outstanding
Common stock, par value $0.01 per share; 100,000 shares authorized, 26,946 and 26,405 shares issued; 26,570 and 26,039 shares outstanding, respectively269264
Additional paid-in capital168,102160,637
Treasury stock, 376 and 366 shares, respectively(5,752)(5,626)
Accumulated other comprehensive income (loss)(1,056)(63)
Accumulated deficit(7,421)(13,121)
Total stockholders' equity154,142 142,091 
Total liabilities and stockholders' equity$230,419 $224,631 
 

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MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)