Medidata Solutions, Inc.
02/21/13

Medidata Solutions Reports Full Year and Fourth Quarter 2012 Results

NEW YORK--(BUSINESS WIRE)-- Medidata Solutions (NASDAQ: MDSO), a leading global provider of cloud-based clinical technology solutions that enhance the efficiency of clinical development, today announced its financial results for the fourth quarter and full year 2012, and provided detailed financial guidance for the first quarter and full year 2013.

"Our stellar fourth quarter, strong execution in 2012 and accelerating growth highlight Medidata as the leading cloud-based platform provider in the life sciences industry," said Tarek Sherif, Medidata's chief executive officer. "The Medidata Clinical Cloud is becoming a de facto standard for life science organizations, helping them transform their clinical development activities by improving decision making and productivity. Our market is dynamic and growing with many life sciences companies emerging from a prolonged period of retrenchment, once again focused on aggressively developing new drugs. In this environment, our existing cloud offerings and ability to innovate, coupled with our customer-centric focus and great execution, position us for continued success."

Full Year and Fourth Quarter Highlights

Sherif added, "Our aggressive investment strategy in 2012 has changed our growth trajectory. We are starting 2013 with strong momentum based on our solid backlog and recognition that we are leading the industry in solving critical problems that help our customers plan and execute the clinical trials of the future."

Financial Highlights

Fourth Quarter 2012 Results

Net revenues for the fourth quarter of 2012 increased 24% to $58.6 million, compared with $47.2 million in the fourth quarter of 2011. The increase in revenues was primarily due to an $11.7 million, or 32%, increase in application services revenues.

Gross margins in the fourth quarter of 2012 were in line with the company's expectations at 72%, a decrease of 1 percentage point over gross margins of 73% a year ago.

GAAP operating income for the quarter increased to $9.3 million, compared with $0.8 million a year ago. Non-GAAP operating income* for the fourth quarter of 2012 increased to $14.0 million, compared with $11.6 million a year ago.

For the fourth quarter and full year of 2011, GAAP operating income reflected, among other items, a $6.3 million settlement of litigation. GAAP net income also included a favorable non-cash tax benefit of $19 million resulting from the reversal of the majority of the company's tax valuation allowance. The company's non-GAAP results excluded, among other items, the impact of the one-time charge and tax benefit.

GAAP net income for the fourth quarter of 2012 was $6.6 million, or $0.25 per diluted share, compared with $18.7 million, or $0.76 per diluted share, in the fourth quarter of 2011. Non-GAAP net income* for the fourth quarter of 2012 was $9.8 million, or $0.38 per diluted share, compared with $9.0 million, or $0.37 per diluted share, in the fourth quarter of 2011. Adjusted non-GAAP net income* for the fourth quarter of 2012 was $9.1 million, or $0.35 per diluted share, compared with $9.0 million, or $0.37 per diluted share, in the fourth quarter of 2011.

Full Year 2012 Results

Net revenues for the full year of 2012 were $218.3 million, an increase of $33.9 million, or 18%, compared with $184.5 million in 2011. The increase in revenues was the result of a $27.2 million, or 19%, increase in revenues from application services and 17% growth in professional services revenue.

Operating expenses for the full year increased 17% to $127.8 million, compared with $109.1 million in 2011 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.

For the full year 2012, gross margins were consistent at 71% versus a year ago.

GAAP operating income for the full year of 2012 was $27.9 million, compared with $22.6 million in 2011. Non-GAAP operating income for the full year was $47.1 million, compared with $45.7 million in 2011.

GAAP net income for the full year was $18.0 million, or $0.71 per diluted share, compared with $39.4 million, or $1.60 per diluted share, in 2011. Non-GAAP net income for 2012 was $31.0 million, or $1.22 per diluted share, compared with $37.3 million, or $1.51 per diluted share, in 2011. Adjusted non-GAAP net income for 2012 was $26.4 million, or $1.03 per diluted share, compared with $37.3 million, or $1.51 per diluted share, in 2011.

Total cash, cash equivalents and marketable securities were $122.6 million at the end of the fourth quarter, an increase of $14.9 million as compared with $107.7 million at the end of the fourth quarter 2011. For the full year, the company generated cash flow from operations of $13.2 million, which was impacted by the timing of payments from certain accounts at year-end and our full effective tax rate in 2012.

Financial Outlook

For the full year 2013, the company expects:

Full year application services backlog as of January 1, 2013 increased 38% to $186 million over the comparable period a year ago. This compares with a 23% increase in full year application services backlog as of January 1, 2012 over the comparable prior period. 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 first quarter of 2013, the company expects:

"Medidata's fourth quarter and full year 2012 results clearly reflect our growing momentum in the market as we delivered strong revenue growth and solid margins, in a period of significant investment in the business," said Cory Douglas, chief financial officer. "Overall we are very pleased with our financial performance in 2012 and given our disciplined approach to investing and the large market opportunity we see ahead of us, we feel well positioned to accelerate our top line growth in 2013 in excess of our long-term target."

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, March 7, 2013 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 97429808. 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, 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, adjustment to the fair value of contingent consideration and a charge associated with a legal settlement. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, adjustment to the fair value of contingent consideration, a charge associated with a legal settlement and a reduction in its valuation allowance. 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 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
       
Three Months Ended

December 31,

Twelve Months Ended

December 31,

2012   2011 2012   2011
(unaudited)
Revenues
Application services $ 47,737 $ 36,064 $ 171,647 $ 144,436
Professional services 10,893   11,131   46,700   40,023  
Total revenues 58,630 47,195 218,347 184,459
Cost of revenues (1)(2)
Application services 8,501 6,937 32,600 28,408
Professional services 7,872   5,947   30,062   24,423  
Total cost of revenues 16,373 12,884 62,662 52,831
 
Gross profit 42,257 34,311 155,685 131,628
 
Operating costs and expenses:
Research and development (1) 10,454 8,057 42,276 29,568
Sales and marketing (1)(2) 12,946 9,628 47,739 36,147
General and administrative (1) 9,607 9,534 37,777 37,056
Litigation settlement   6,300     6,300  
Total operating costs and expenses 33,007   33,519   127,792   109,071  
 
Operating income 9,250 792 27,893 22,557
 
Interest and other income (expense):
Interest expense (18 ) (26 ) (138 ) (123 )
Interest income 84 66 280 293
Other income (expense), net 51   (4 ) 34   238  
Total interest and other income, net 117   36   176   408  
 
Income before income taxes 9,367 828 28,069 22,965
 
Provision for income taxes 2,774   (17,905 ) 10,049   (16,433 )
 
Net income $ 6,593   $ 18,733   $ 18,020   $ 39,398  
 
Earnings per share:
Basic $ 0.26   $ 0.79   $ 0.73   $ 1.67  
Diluted $ 0.25   $ 0.76   $ 0.71   $ 1.60  
 
Weighted average common shares outstanding:
Basic 24,980 23,843 24,546 23,646
Diluted 25,948 24,616 25,469 24,657
 
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues 459 341 1,751 1,263
Research and development 262 222 1,049 745
Sales and marketing 743 550 2,871 2,014
General and administrative 1,287   1,234   5,243   4,798  
Total stock-based compensation $ 2,751   $ 2,347   $ 10,914   $ 8,820  
 
(2) Amortization expense of intangible assets included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues 321 318 1,276 1,088
Sales and marketing 129   127   516   501  
Total amortization of intangible assets $ 450   $ 445   $ 1,792   $ 1,589  
 

 
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

December 31,

    Twelve Months Ended

December 31,

2012   2011 2012   2011
Operating income:
GAAP operating income $ 9,250 $ 792 $ 27,893 $ 22,557
GAAP operating margins 15.8 % 1.7 % 12.8 % 12.3 %
Stock-based compensation 2,751 2,347 10,914 8,820
Depreciation and amortization 1,937 1,915 7,934 7,817
Contingent consideration adjustment (1) 42 223 319 223
Litigation settlement (2)   6,300     6,300  
 
Non-GAAP operating income $ 13,980   $ 11,577   $ 47,060   $ 45,717  
Non-GAAP operating margins 23.8 % 24.5 % 21.6 % 24.8 %
 
Net income:
GAAP net income $ 6,593 $ 18,733 $ 18,020 $ 39,398
 
Stock-based compensation 2,751 2,347 10,914 8,820
Amortization 450 445 1,792 1,589
Contingent consideration adjustment (1) 42 223 319 223
Litigation settlement (2) 6,300 6,300
Reversal of valuation allowance (3)   (19,037 )   (19,037 )
 
Non-GAAP net income 9,836 9,011 31,045 37,293
 
Tax impact on add-back items (4) (776 )   (4,689 )  
 
Adjusted non-GAAP net income $ 9,060   $ 9,011   $ 26,356   $ 37,293  
 
GAAP basic earnings per share $ 0.26   $ 0.79   $ 0.73   $ 1.67  
GAAP diluted earnings per share $ 0.25   $ 0.76   $ 0.71   $ 1.60  
 
Non-GAAP basic earnings per share $ 0.39   $ 0.38   $ 1.26   $ 1.58  
Non-GAAP diluted earnings per share $ 0.38   $ 0.37   $ 1.22   $ 1.51  
 
Adjusted Non-GAAP basic earnings per share $ 0.36   $ 0.38   $ 1.07   $ 1.58  
Adjusted Non-GAAP diluted earnings per share $ 0.35   $ 0.37   $ 1.03   $ 1.51  
 
(1) Amount represents the effect of changes in fair value of contingent consideration liability.
(2) Amount represents the effect of the settlement of litigation with Datasci.
(3) Amount represents the effect of tax benefit recognized as a result of the reversal of the majority of the valuation allowance.
(4) Tax impact calculated based on an annual effective tax rate of 36% for 2012.
   
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 and twelve months ended December 31, 2012 and 2011. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, stock-based compensation expense, adjustment to the fair value of contingent consideration, and a charge associated with a legal settlement. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, adjustment to the fair value of contingent consideration, a charge associated with a legal settlement, and reversal of valuation allowance. 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.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
       
December 31, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 32,683 $ 45,214
Marketable securities 89,871 62,463
Accounts receivable, net of allowance for doubtful accounts of $747 and $882, respectively 42,359 22,970
Prepaid commission expense 2,281 1,743
Prepaid expenses and other current assets 8,042 4,380
Deferred income taxes 7,465   10,896  
 
Total current assets 182,701 147,666
 
Restricted cash 388 388
Furniture, fixtures and equipment, net 10,474 9,825
Goodwill 15,382 15,164
Intangible assets, net 1,708 3,425
Deferred income taxes, long-term 11,055 11,581
Other assets 2,923   1,786  
 
Total assets $ 224,631   $ 189,835  
 
LIABILITIES AND STOCKHOLDERS EQUITY
 
Current liabilities:
Accounts payable $ 2,998 $ 3,861
Accrued payroll and other compensation 14,140 9,854
Accrued expenses and other 6,674 5,886
Deferred revenue 50,348 51,225
Capital lease obligations 55   114  
 
Total current liabilities 74,215   70,940  
 
Noncurrent liabilities:
 
Deferred revenue, less current portion 4,323 12,037
Deferred tax liabilities 624 629
Capital lease obligations, less current portion 100 136
Other long-term liabilities 3,278   1,976  
 
Total noncurrent liabilities 8,325   14,778  
 
Total liabilities 82,540   85,718  
 
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, 26,405 and 25,053 shares issued; 26,039 and 24,888 shares outstanding, respectively 264 250
Additional paid-in capital 160,637 137,556
Treasury stock, 366 and 165 shares, respectively (5,626 ) (2,186 )
Accumulated other comprehensive loss (63 ) (362 )
Accumulated deficit (13,121 ) (31,141 )
 
Total stockholders' equity 142,091   104,117  
 
Total liabilities and stockholders' equity $ 224,631   $ 189,835  
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
   
Year Ended December 31,
2012   2011
Cash flows from operating activities:
Net income $ 18,020 $ 39,398
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,934 7,817
Stock-based compensation 10,914 8,820
Amortization of discounts or premiums on marketable securities 1,573 1,290
Deferred income taxes 3,123 (21,693 )
Amortization of debt issuance costs 60 60
Excess tax benefit associated with equity awards (3,655 ) (3,255 )
Contingent consideration adjustment 319 223
Changes in operating assets and liabilities:
Accounts receivable (15,891 ) 12,396
Prepaid commission expense (1,426 ) 874
Prepaid expenses and other current assets (2,553 ) 1,725
Other assets (1,372 ) (505 )
Accounts payable (823 ) 885
Accrued payroll and other compensation 4,286 (1,678 )
Accrued expenses and other 2,226 4,243
Deferred revenue (11,471 ) (21,908 )
Other long-term liabilities 1,981   (24 )
 
Net cash provided by operating activities 13,245   28,668  
 
Cash flows from investing activities:
Purchases of furniture, fixtures and equipment (5,742 ) (4,411 )
Purchases of available-for-sale marketable securities (109,320 ) (117,098 )
Proceeds from sale of available-for-sale marketable securities 80,370 122,759
Acquisition of business, net of cash acquired (5,166 )
Decrease in restricted cash   144  
 
Net cash used in investing activities (34,692 ) (3,772 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options 9,328 3,475
Excess tax benefit associated with equity awards 3,655 3,255
Payment of acquisition-related earn-out (251 )
Repayment of obligations under capital leases (268 ) (725 )
Acquisition of treasury stock (3,439 ) (1,712 )
Repayment of notes payable (113 )  
 
Net cash provided by financing activities 8,912   4,293  
 
Net (decrease) increase in cash and cash equivalents (12,535 ) 29,189
Effect of exchange rate changes on cash and cash equivalents 4
Cash and cash equivalents - Beginning of period 45,214   16,025  
Cash and cash equivalents - End of period $ 32,683   $ 45,214  
 

Investor Contact:
Medidata Solutions
Hulus Alpay, 212.419.1025
halpay@mdsol.com
or
Media Contact:
Edelman
Geoff Curtis, 212.277.3718
geoff.curtis@edelman.com

Source: Medidata Solutions

News Provided by Acquire Media