Medidata Solutions Reports Third Quarter 2012 Results
Year to date bookings grew 100% year over year
Record total revenues of $55.8 million, increased 21% year over year
GAAP operating income of $6.8 million, increased 20% sequentially
Raises full year revenue guidance to between $217.7 and $219.7 million
NEW YORK--(BUSINESS WIRE)-- Medidata Solutions (NAS: MDSO) , a leading global provider of cloud-based drug development solutions that optimize the efficiency of clinical development, today announced its financial results for the third quarter of 2012, and provided detailed financial guidance for the fourth quarter and full year 2012.
"Medidata's sales execution, healthy top-line growth and robust fourth quarter pipeline are proof that the aggressive investment strategy we initiated earlier this year, focused on expanding our product footprint and our sales coverage and capabilities, is paying off," said Tarek Sherif, Medidata's chief executive officer. "This quarter, we signed significant commitments with several top 25 life sciences companies, including Sanofi and Otsuka Pharmaceutical. In combination with accelerating multi-product adoption by new and existing customers, it is clear that life sciences companies are increasingly relying on the Medidata Clinical Cloud to achieve improved productivity and competitive advantage in their clinical development efforts."
Third Quarter and Year to Date Highlights
Bookings in the quarter were the second highest in the company's history, with year to date activity ahead of the entire full year of 2011 by 34%, exceeding internal expectations.
Record revenues for the quarter of $55.8 million increased 21% year over year, exceeding the company's long-term revenue growth target of 20%.
For the quarter, non-Rave revenues increased 142% year over year and 27% sequentially. Year to date, non-Rave revenues grew 145% year over year.
Total customers were up 28% over last year, to a record 333, a net increase of 72 customers year over year. Six current customers upgraded to enterprise deals from study-by-study arrangements in the quarter, highlighting the increasing adoption of the Medidata platform. These new enterprise customers include Sanofi, one of the world's leading pharmaceutical companies; Otsuka Pharmaceutical, one of Japan's top 10 pharmas; and a Top 5 contract research organization.
Current customers contracting for additional products grew by 50% over last quarter, showing continued growth in the Medidata Clinical Cloud platform. Customers with multiple products now account for over 35% of the total customer base.
Mr. Sherif continued, "We have been investing to extend our cloud-based platform, expand our addressable market from $2 billion around the time of our IPO to $6 billion today and drive our continued momentum. Given the fundamentals in our industry, our proven ability to execute and accelerating customer commitments, and despite a challenging economic environment, Medidata is well positioned for strong revenue growth in the fourth quarter and in 2013."
Revenues for the third quarter of 2012 increased 21% to a record $55.8 million, compared with $46.3 million in the third quarter of 2011. Application services revenues for the third quarter of 2012 increased 22% year over year and 6% sequentially to $44.0 million.
Gross margins in the third quarter of 2012 were 72%, an increase of one percentage point over gross margins of 71% a year ago.
Operating expenses in the third quarter increased 3% sequentially to $33.1 million and 31% compared to the third quarter last year, primarily due to growth related initiatives. These include increased staffing-related costs in R&D, higher sales compensation and sales-related expense, and certain charges in G&A related to higher professional fees and miscellaneous charges.
GAAP operating income for the third quarter of 2012 increased 20% sequentially to $6.8 million, compared with $5.7 million in the second quarter. Non-GAAP operating income* for the quarter increased 7% sequentially to $11.8 million, compared with $11.0 million in the second quarter.
GAAP net income for the third quarter of 2012 increased 12% sequentially to $4.1 million, or $0.16 per diluted share, compared with $3.6 million, or $0.14 per diluted share, in the second quarter. Non-GAAP net income* for the third quarter of 2012 increased 2% sequentially to $7.5 million, or $0.29 per diluted share, compared with $7.3 million, or $0.29 per diluted share, in the second quarter. Adjusted non-GAAP net income* for the third quarter of 2012 increased 5% sequentially to $6.1 million, or $0.24 per diluted share, compared with $5.8 million, or $0.23 per diluted share, in the second quarter.
Total cash, cash equivalents and marketable securities were $123.6 million at the end of the third quarter, an increase of $15.9 million from the beginning of 2012. Year to date, the company generated cash flow from operations of $16.7 million, including $8.5 million in the third quarter.
For the full year 2012, the company expects:
Revenues between $217.7 and $219.7 million.
Professional services revenues in the high $40 million range.
Non-GAAP operating income between $45.6 and $47.1 million. Based on current estimates, this would equate to GAAP operating income between $26.1 and $27.6 million.
Non-GAAP net income between $28.7 and $30.2 million. Based on current estimates, this would equate to GAAP net income between $15.4 and $16.9 million.
Adjusted non-GAAP net income, which includes the tax effected impact from stock-based compensation and amortization at a 40% effective tax rate, between $23.3 and $24.8 million.
While changes in the stock price could change the fully diluted share count, the company is assuming 25.4 million fully diluted shares.
Application services backlog for the remainder of the year, as of September 30, 2012, was $44 million, an increase of 31% over the comparable period a year ago. This compares with a 5% increase in remaining application services backlog as of September 30, 2011 over the comparable period in 2010. The difference between the application services backlog and the balance of revenue guidance for the remainder of the year includes professional services revenue guidance and expected additional business from new and existing customers.
For the fourth quarter of 2012, the company expects:
Revenues between $58.0 and $60.0 million.
Non-GAAP operating income between $12.5 and $14.0 million. Based on current estimates this would equate to GAAP operating income between $7.5 and $9.0 million.
Non-GAAP net income between $7.5 and $9.0 million. Based on current estimates, this would equate to GAAP net income between $4.0 and $5.5 million.
Adjusted non-GAAP net income, which includes the tax effected impact from stock-based compensation and amortization at a 40% effective tax rate, between $6.0 and $7.5 million.
While changes in the stock price could change the fully diluted share count, the company is assuming 25.8 million fully diluted shares.
"During the quarter we hired ahead of plan in R&D and incurred higher sales compensation expense due to our sales organization's outperformance. Our revenue growth in excess of our long-term growth target for the remainder of the year clearly supports our investment strategy. We now expect 23-27% year over year top line growth in the fourth quarter," said Cory Douglas, Medidata's chief financial officer.
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 Wednesday, November 14, 2012 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 40140106. 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.
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, 2011. 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 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.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 investor's 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.
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