Medidata Solutions Reports Record Second Quarter 2013 Results

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Medidata Solutions Reports Record Second Quarter 2013 Results

  • Record revenues of $68.1 million, a 27% year-over-year increase
  • Record application services revenue of $56.3 million, a 36% year-over-year increase
  • Raises 2013 revenue guidance to between $273 and $276 million

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

"Our great execution and the growing market opportunity for the Medidata Clinical Cloud are evident in our record second quarter financial results, growing product penetration and positive outlook for the remainder of the year," said Tarek Sherif, Medidata's chairman and chief executive officer. "The strength of our vertical SaaS model comes from the combination of our modern cloud technology and deep domain expertise. Coupled with the industry's richest repository of clinical trial data, Medidata's platform is transforming clinical research."


Second Quarter 2013 Results

  • Total revenues for the second quarter of 2013 were $68.1 million, an increase of $14.6 million, or 27%, compared with $53.5 million in 2012. Application services revenue was $56.3 million, an increase of 36% compared with the same period last year.
  • GAAP operating income for the quarter increased to $8.8 million, up 55%, compared with $5.7 million a year ago. Non-GAAP operating income* for the second quarter of 2013 increased to $17.5 million, up 60%, compared with $11.0 million a year ago.
  • GAAP net income for the second quarter of 2013 was $5.1 million, or $0.19 per diluted share, up 42%, compared with $3.6 million, or $0.14 per diluted share, in the second quarter of 2012. Adjusted non-GAAP net income* for the second quarter of 2013 was $9.5 million, or $0.36 per diluted share, up 63%, compared with $5.8 million, or $0.23 per diluted share, in the second quarter of 2012.
  • Application services backlog for the remainder of the year as of June 30, 2013, increased to $110 million, up 38% over the comparable period a year ago. Non-Rave products account for 23% of remaining backlog.
  • Total cash, cash equivalents and marketable securities were $140.4 million at the end of the second quarter, an increase of $26.5 million, or 23%, as compared with $113.9 million at the end of the second quarter 2012.
  • Cash flow from operations was a record $26.2 million in the second quarter, up 361% year-over-year.

Additional Highlights

  • Medidata's customer base grew to 363 in the second quarter of 2013, up 15% from the second quarter of 2012.
  • 45% of customers have committed to multiple products at the end of the second quarter of 2013 as compared with 41% at the end of the first quarter of 2013.
  • Non-Rave revenues increased 144% year-over-year, driven by significant growth in Medidata's patient randomization and trial supply, and medical coding applications.
  • Medidata's revenue retention rate for the quarter was 99.4%.
  • Medidata announced the availability of the Medidata Clinical Cloud Study, an easy-to-acquire, ready-in-weeks offering for mid-sized and small customers, single programs and large customer pilots.

"Our revised revenue and profitability guidance continues to validate our prudent investments in sustainable growth," said Cory Douglas, chief financial officer. "Record operating cash flow this quarter also demonstrates the long-term cash generation potential of Medidata's highly scalable and vertically focused cloud business."

Financial Outlook

For the full year 2013, the company now expects:

  • Revenues between $273.0 and $276.0 million.
  • Professional services revenues in the high $40 million range.
  • Non-GAAP operating income between $64.0 and $67.0 million. Based on current estimates, this would equate to GAAP operating income between $29.0 and $32.0 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 $34.0 and $37.0 million. Based on current estimates, this would equate to GAAP net income between $17.5 and $20.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.8 million fully diluted shares.

For the third quarter of 2013, the company expects:

  • Revenues between $69.5 and $71.0 million.
  • Non-GAAP operating income between $16.0 and $17.0 million. Based on current estimates, this would equate to GAAP operating income between $7.0 and $8.0 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 $8.0 and $9.0 million. Based on current estimates, this would equate to GAAP net income between $3.5 and $4.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 27.0 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 Thursday, August 8, 2013, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 17553261. 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

Medidata Solutions is the leading global provider of cloud-based solutions for clinical research in life sciences, transforming clinical development through its advanced applications and intelligent data analytics. The Medidata Clinical Cloud™ brings new levels of productivity and quality to the clinical testing of promising medical treatments, from study design and planning through execution, management and reporting. We are committed to advancing the competitive and scientific goals of global customers, which include over 90% of the top 25 global pharmaceutical companies; innovative biotech, diagnostic and device firms; leading academic medical centers; and contract research organizations.

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 June 30,Six Months Ended June 30,
2013 20122013 2012
Revenues
Application services$56,346$41,541$106,998$79,937
Professional services11,723 11,972 24,330 23,935 
Total revenues68,06953,513131,328103,872
Cost of revenues (1)(2)
Application services8,9498,21317,97415,697
Professional services7,971 7,562 16,075 14,693 
Total cost of revenues16,92015,77534,04930,390
Gross profit51,14937,73897,27973,482
Operating costs and expenses:
Research and development (1)12,10510,62824,01020,583
Sales and marketing (1)(2)16,25312,26330,74222,646
General and administrative (1)13,955 9,159 26,599 18,449 
Total operating costs and expenses42,313 32,050 81,351 61,678 
Operating income8,8365,68815,92811,804
Interest and other income (expense):
Interest expense(27)(28)(45)(49)
Interest income5960135131
Other (expense) income, net(10)(10)144 (10)
Total interest and other income, net22 22 234 72 
Income before income taxes8,8585,71016,16211,876
Provision for income taxes3,752 2,106 5,356 4,502 
Net income$5,106 $3,604 $10,806 $7,374 
Earnings per share:
Basic$0.20 $0.15 $0.43 $0.30 
Diluted$0.19 $0.14 $0.41 $0.29 
Weighted average common shares outstanding:
Basic25,42524,40625,27324,212
Diluted26,74425,27726,52825,082
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues$838$514$1,325$809
Research and development6273071,085498
Sales and marketing1,7228032,9441,367
General and administrative3,937 1,534 6,975 2,638 
Total stock-based compensation$7,124 $3,158 $12,329 $5,312 
(2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues$101$319$382$637
Sales and marketing33 129 146 258 
Total amortization of intangible assets$134 $448 $528 $895 

 
 
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 June 30,Six Months Ended June 30,
2013 20122013 2012
Operating income:
GAAP operating income$8,836$5,688$15,928$11,804
GAAP operating margins13.0%10.7%12.1%11.4%
Stock-based compensation7,1243,15812,3295,312
Depreciation and amortization1,4732,0343,3244,028
Contingent consideration adjustment (1)60 80 120 160 
Non-GAAP operating income$17,493 $10,960 $31,701 $21,304 
Non-GAAP operating margins25.7%20.5%24.1%20.5%
Net income:
GAAP net income$5,106$3,604$10,806$7,374
Stock-based compensation7,1243,15812,3295,312
Amortization134448528895
Contingent consideration adjustment (1)60 80 120 160 
Non-GAAP net income12,4247,29023,78313,741
Tax impact on add-back items (2)(2,927)(1,475)(5,191)(2,547)
Adjusted non-GAAP net income$9,497 $5,815 $18,592 $11,194 
GAAP basic earnings per share$0.20 $0.15 $0.43 $0.30 
GAAP diluted earnings per share$0.19 $0.14 $0.41 $0.29 
Non-GAAP basic earnings per share$0.49 $0.30 $0.94 Read Full Story

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