Medidata Solutions, Inc.
05/10/11

Medidata Solutions Reports Record First Quarter 2011 Results

Application services revenue up 12%

GAAP diluted EPS up 63%

Cash flows from operations up 490% to $5.8 million

19 new customer wins

Confirms full year and provides second quarter 2011 guidance

NEW YORK--(BUSINESS WIRE)-- Medidata Solutions (NASDAQ: MDSO), a leading global provider of SaaS-based clinical technology solutions that enhance the efficiency of clinical development, today announced its financial results for the first quarter 2011, as well as provided financial guidance for the second quarter and full year 2011.

"Our sales and product momentum position us as the leading independent provider of solutions that improve decision effectiveness, lower overall cost and improve time to market in new drug development. We are executing well, while our focus on innovation is allowing us to grow our total addressable market," said Tarek Sherif, chairman and chief executive officer of Medidata. "The core of our business is healthy and growing, and we are very excited about the opportunities that lie before us, particularly given the favorable competitive environment. Medidata's product strategy is being fully embraced by our customers. Our reputation for integrity, high-quality service and products, and our single-minded focus on making our customers successful is driving continued market share gains for our company."

Business Highlights

Financial Highlights

Net revenues for the first quarter of 2011 were $40.8 million, an increase of $3.1 million, or 8%, compared with $37.6 million in the first quarter of 2010. The increase in revenues was due to a $3.7 million, or 12%, increase in revenues from application services, partially offset by a decline in revenues from professional services, which continues to represent a smaller portion of the company's total revenue. Approximately $0.5 million of revenue that was expected in the first quarter is now expected to be recognized in the second quarter, which is reflected in the company's second quarter guidance.

Gross margins in the first quarter of 2011 were 68%, an increase of approximately 2 percentage points over gross margins of 66% a year ago.

Non-GAAP operating income* for the first quarter of 2011 increased 8% to $7.2 million, compared with $6.7 million a year ago. GAAP operating income for the quarter increased 18% to $3.5 million, compared with $2.9 million a year ago.

Non-GAAP net income for the first quarter of 2011 increased to $5.3 million, or $0.21 per diluted share, compared with $3.4 million, or $0.14 per diluted share, in the first quarter of 2010. GAAP net income for the first quarter of 2011 increased to $3.2 million, or $0.13 per diluted share, compared with $1.9 million, or $0.08 per diluted share, in the first quarter of 2010.

Cash flow from operations for the first quarter increased to $5.8 million, due to the company's improving profitability and changes in working capital.

Financial Outlook

For the full year 2011, the company confirms its previous guidance of expected revenues between $180 and $188 million. Non-GAAP operating income is expected to be between $43 and $47 million. Based on current estimates, this would equate to GAAP operating income between $26 and $30 million. Non-GAAP net income is expected to be between $35 and $39 million. Based on current estimates, this would equate to GAAP net income between $25 and $29 million. Cash flow from operations is expected to be over $40 million.

Total remaining backlog for 2011 was $104 million at the end of the first quarter. Remaining year backlog represents the amount of contractual revenue already booked, which is expected to be recognized during the remainder of the year. The difference between the backlog and balance of revenue guidance for the remainder of the year includes renewals of large agreements and new product traction, as well as additional business from new and existing customers.

For the second quarter of 2011, the company expects revenues to be between $44.5 and $45.5 million. This includes $0.5 million of revenue that was expected to be recognized in the first quarter. The company expects non-GAAP operating income to be between $10.5 and $11.5 million. Based on current estimates this would equate to GAAP operating income of $6.0 and $7.0 million. Non-GAAP net income is expected to be between $8.0 and $9.0 million. Based on current estimates, this would equate to GAAP net income of between $5.5 and $6.5 million.

While changes in the stock price could change the fully diluted share count, the company is assuming 25.0 and 25.1 million fully diluted shares in the second quarter and full year, respectively.

Bruce Dalziel, chief financial officer and executive vice president, compliance, noted, "We have established a steady and consistent track record of gross margin expansion, high renewal rates and overall profitable growth. As reflected in our first quarter results, 2011 is expected to be a good year in terms of profitability and operating cash flow growth."

Conference Call

The company plans to host its investor conference call today at 5:00 p.m. Eastern Time to discuss its financial results for the first quarter and its outlook for the second quarter and full year 2011. 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 Tuesday, May 24, 2011 by dialing 800-642-1687 domestically or 706-645-9291 internationally, with the passcode 62194054. 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 SaaS 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 protocol development (Medidata Designer®), trial planning and management (Medidata Grants Manager®, Medidata CRO Contractor®), clinical portal (iMedidata), randomization and trial supply management (Medidata Balance), monitoring (Medidata Rave Monitor, Medidata Rave Targeted SDV), safety events capture (Medidata Rave Safety Gateway), clinical data capture and management (Medidata Rave®) to advanced reporting and analytics (Medidata Insights). 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, 2010. 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 purchased intangible assets and acquisition-related charges and stock-based compensation expense. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions and stock-based compensation expense. 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.

MEDIDATA SOLUTIONS, INC.
   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
 
Three Months Ended
March 31,
2011 2010
 
Revenues
Application services $ 33,405 $ 29,730
Professional services   7,352     7,912  
Total revenues 40,757 37,642
 
Cost of revenues
Application services 7,142 6,067
Professional services   5,946     6,509  
Total cost of revenues 13,088 12,576
 
Gross profit 27,669 25,066
 
Operating costs and expenses:
Research and development 7,162 6,334
Sales and marketing 7,947 7,493
General and administrative   9,086     8,295  
 
Total operating costs and expenses   24,195     22,122  
 
Operating income 3,474 2,944
 
Interest and other income (expense):
Interest expense (36 ) (80 )
Interest income 88 93
Other income (expense), net   28     (31 )
 
Total interest and other income (expense), net   80     (18 )
 
Income before income taxes 3,554 2,926
 
Provision for income taxes   368     1,062  
 
Net income $ 3,186   $ 1,864  
 
Earnings per share:
Basic $ 0.14   $ 0.08  
Diluted $ 0.13   $ 0.08  
 
Weighted average common shares outstanding:
Basic 23,411 22,732
Diluted 24,799 23,640

MEDIDATA SOLUTIONS, INC.
   
Reconciliation of GAAP Operating Income and GAAP Net Income to
Non-GAAP Operating Income and Non-GAAP Net Income
(unaudited)
(Amounts in thousands, except per share data)
 
Three Months Ended
March 31,
2011 2010
 
Operating income:
GAAP operating income $ 3,474 $ 2,944
GAAP operating margins 8.5 % 7.9 %
 
Depreciation and amortization 2,022 2,593
Stock-based compensation   1,740     1,150  
 
Non-GAAP operating income $ 7,236   $ 6,687  
Non-GAAP operating margins   17.8 %   17.8 %
 
 
Net income:
GAAP net income $ 3,186 $ 1,864
 
Stock-based compensation 1,740 1,150
Amortization   361     365  
 
Non-GAAP net income $ 5,287   $ 3,379  
 
GAAP basic earnings per share $ 0.14   $ 0.08  
GAAP diluted earnings per share $ 0.13   $ 0.08  
 
Non-GAAP basic earnings per share $ 0.23   $ 0.15  
Non-GAAP diluted earnings per share $ 0.21   $ 0.14  

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, 2011. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions and stock-based compensation expense. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions and stock-based compensation expense.

MEDIDATA SOLUTIONS, INC.
   
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Amounts in thousands, except per share data)
 
March 31, December 31,
2011 2010
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 36,519 $ 16,025
Marketable securities 54,552 69,473
Accounts receivable, net of allowance for doubtful accounts of $398 and $308, respectively 29,682 34,268
Prepaid commission expense 2,396 3,087
Prepaid expenses and other current assets 5,126 6,297
Deferred income taxes   3,728     3,731  
 
Total current assets 132,003 132,881
 
Restricted cash 532 532
Furniture, fixtures and equipment, net 10,240 10,993
Goodwill 9,799 9,799
Intangible assets, net 2,584 2,945
Other assets   2,950     795  
 
Total assets $ 158,108   $ 157,945  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 3,360 $ 2,797
Accrued payroll and other compensation 4,574 11,520
Accrued expenses and other 4,380 4,058
Deferred revenue 65,059 63,228
Capital lease obligations   474     712  
 
Total current liabilities   77,847     82,315  
 
Noncurrent liabilities:
Deferred revenue, less current portion 19,409 20,540
Deferred tax liabilities 3,428 3,418
Capital lease obligations, less current portion 24 68
Other long-term liabilities   449     478  
 
Total noncurrent liabilities   23,310     24,504  
 
Total liabilities   101,157     106,819  
 
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, 24,249 and 24,141 shares issued; 24,196 and 24,089 shares outstanding, respectively
243 241
Additional paid-in capital 124,577 122,015
Treasury stock, 53 and 52 shares, respectively (474 ) (474 )
Accumulated other comprehensive loss (42 ) (117 )
Accumulated deficit   (67,353 )   (70,539 )
 
Total stockholders' equity   56,951     51,126  
 
Total liabilities and stockholders' equity $ 158,108   $ 157,945  

MEDIDATA SOLUTIONS, INC.
     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
Three Months Ended
March 31,
2011 2010
 
Cash flows from operating activities:
Net income $ 3,186 $ 1,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,022 2,593
Stock-based compensation 1,740 1,150
Amortization of discounts or premiums on marketable securities 245 267
Deferred income taxes 14 15
Amortization of debt issuance costs 15 13
Changes in operating assets and liabilities:
Accounts receivable 4,586 234
Prepaid commission expense (23 ) (27 )
Prepaid expenses and other current assets 162 56
Other assets (446 ) 11
Accounts payable 68 (269 )
Accrued payroll and other compensation (6,946 ) (5,756 )
Accrued expenses and other 466 (1,993 )
Deferred revenue 700 2,860
Other long-term liabilities   (29 )   (41 )
 
Net cash provided by operating activities   5,760     977  
 
Cash flows from investing activities:
Purchases of furniture, fixtures and equipment (495 ) (3,368 )
Purchases of available-for-sale marketable securities (21,909 ) (17,451 )
Proceeds from sale of available-for-sale marketable securities   36,567     2,250  
 
Net cash provided by (used in) investing activities   14,163     (18,569 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options 824 522
Repayment of obligations under capital leases   (282 )   (1,050 )
 
Net cash provided by (used in) financing activities   542     (528 )
 
Net increase (decrease) in cash and cash equivalents 20,465 (18,120 )
 
Effect of exchange rate changes on cash and cash equivalents 29 (18 )
 
Cash and cash equivalents — Beginning of period   16,025     39,449  
 
Cash and cash equivalents — End of period $ 36,519   $ 21,311  

Investor Contact:
Medidata Solutions
Hulus Alpay, 212-419-1025
halpay@mdsol.com
or
Media Contact:
Lois Paul & Partners
Susan McCarron, 781-782-5767
susan_mccarron@lpp.com

Source: Medidata Solutions

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