Medidata Solutions, Inc.
04/29/13

Medidata Solutions Reports Record First Quarter 2013 Results

NEW YORK--(BUSINESS WIRE)-- Medidata Solutions (NASDAQ: 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

Additional Highlights

"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:

For the second quarter of 2013, the company expects:

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)
  Three Months Ended March 31,
2013   2012
Cash flows from operating activities:
Net income $ 5,700 $ 3,770
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,851 1,994
Stock-based compensation 5,205 2,154
Amortization of discounts or premiums on marketable securities 504 317
Deferred income taxes 718 272
Amortization of debt issuance costs 15 15
Excess tax benefit associated with equity awards (610 ) (1,264 )
Contingent consideration adjustment 60 80
Provision for doubtful accounts 657 51
Changes in operating assets and liabilities:
Accounts receivable (4,249 ) (5,809 )
Prepaid commission expense (917 ) (321 )
Prepaid expenses and other current assets 684 (97 )
Other assets (73 ) (133 )
Accounts payable (1,558 ) (1,438 )
Accrued payroll and other compensation (6,643 ) (4,048 )
Accrued expenses and other 1,518 2,107
Deferred revenue (287 ) 4,941
Other long-term liabilities 322   (43 )
Net cash provided by operating activities 2,897   2,548  
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (2,947 ) (1,821 )
Purchase of available-for-sale marketable securities (27,416 ) (20,440 )
Proceeds from sale of available-for-sale marketable securities 30,030 29,757
Decrease in restricted cash 388    
Net cash provided by investing activities 55   7,496  
Cash flows from financing activities:
Proceeds from exercise of stock options 1,655 2,216
Excess tax benefit associated with equity awards 610 1,264
Payment of acquisition-related earn-out (380 ) (251 )
Repayment of obligations under capital leases (14 ) (56 )
Acquisition of treasury stock (126 ) (50 )
Repayment of notes payable (38 )  
Net cash provided by financing activities 1,707   3,123  
Net increase in cash and cash equivalents 4,659 13,167
Effect of exchange rate changes on cash and cash equivalents (51 ) 6
Cash and cash equivalents - Beginning of period 32,683   45,214  
Cash and cash equivalents - End of period $ 37,291   $ 58,387  
 

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

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