Medidata Solutions Reports Record First Quarter 2013 Results

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 services

12,607

11,963

Total revenues

63,259

50,359

Cost of revenues (1)(2)

Application services

9,025

7,484

Professional services

8,104

7,131

Total cost of revenues

17,129

14,615

Gross profit

46,130

35,744

Operating costs and expenses:

Research and development(1)

11,905

9,955

Sales and marketing (1)(2)

14,489

10,383

General and administrative (1)

12,644

9,290

Total operating costs and expenses

39,038

29,628

Operating income

7,092

6,116

Interest and other income (expense):

Interest expense

(18

)

(21

)

Interest income

76

71

Other income, net

154

Total interest and other income, net

212

50

Income before income taxes

7,304

6,166

Provision for income taxes

1,604

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:

Basic

25,120

24,017

Diluted

26,261

24,842

(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 development

458

192

Sales and marketing

1,222

564

General and administrative

3,038

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 marketing

113

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 margins

11.2

%

12.1

%

Stock-based compensation

5,205

2,154

Depreciation and amortization

1,851

1,994

Contingent consideration adjustment (1)

60

80

Non-GAAP operating income

$

14,208

$

10,344

Non-GAAP operating margins

22.5

%

20.5

%

Net income:

GAAP net income

$

5,700

$

3,770

Stock-based compensation

5,205

2,154

Amortization

394

447

Contingent consideration adjustment (1)

60

80

Non-GAAP net income

11,359

6,451

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 securities

83,086

89,871

Accounts receivable, net of allowance for doubtful accounts of $1,130 and $747, respectively

48,398

42,359

Prepaid commission expense

3,113

2,281

Prepaid expenses and other current assets

7,717

8,042

Deferred income taxes

6,731

7,465

Total current assets

186,336

182,701

Restricted cash

388

Furniture, fixtures and equipment, net

10,542

10,474

Marketable securities, long-term

3,655

Goodwill

15,081

15,382

Intangible assets, net

1,230

1,708

Deferred income taxes, long-term

10,752

11,055

Other assets

2,823

2,923

Total assets

$

230,419

$

224,631

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,319

$

2,998

Accrued payroll and other compensation

7,716

14,140

Accrued expenses and other

7,134

6,674

Deferred revenue

53,213

50,348

Capital lease obligations

55

55

Total current liabilities

69,437

74,215

Noncurrent liabilities:

Deferred revenue, less current portion

3,722

4,323

Deferred tax liabilities

293

624

Capital lease obligations, less current portion

86

100

Other long-term liabilities

2,739

3,278

Total noncurrent liabilities

6,840

8,325

Total liabilities

76,277

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, respectively

269

264

Additional paid-in capital

168,102

160,637

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' equity

154,142

142,091

Total liabilities and stockholders' equity

$

230,419

$

224,631

MEDIDATA SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in thousands)