Medidata Solutions, Inc.
07/25/13

Medidata Solutions Reports Record Second Quarter 2013 Results

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

Additional Highlights

"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:

For the third 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 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   2012 2013   2012
Revenues
Application services $ 56,346 $ 41,541 $ 106,998 $ 79,937
Professional services 11,723   11,972   24,330   23,935  
Total revenues 68,069 53,513 131,328 103,872
Cost of revenues (1)(2)
Application services 8,949 8,213 17,974 15,697
Professional services 7,971   7,562   16,075   14,693  
Total cost of revenues 16,920 15,775 34,049 30,390
Gross profit 51,149 37,738 97,279 73,482
Operating costs and expenses:
Research and development (1) 12,105 10,628 24,010 20,583
Sales and marketing (1)(2) 16,253 12,263 30,742 22,646
General and administrative (1) 13,955   9,159   26,599   18,449  
Total operating costs and expenses 42,313   32,050   81,351   61,678  
Operating income 8,836 5,688 15,928 11,804
Interest and other income (expense):
Interest expense (27 ) (28 ) (45 ) (49 )
Interest income 59 60 135 131
Other (expense) income, net (10 ) (10 ) 144   (10 )
Total interest and other income, net 22   22   234   72  
Income before income taxes 8,858 5,710 16,162 11,876
Provision for income taxes 3,752   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:
Basic 25,425 24,406 25,273 24,212
Diluted 26,744 25,277 26,528 25,082
(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 development 627 307 1,085 498
Sales and marketing 1,722 803 2,944 1,367
General and administrative 3,937   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 marketing 33   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   2012 2013   2012
Operating income:
GAAP operating income $ 8,836 $ 5,688 $ 15,928 $ 11,804
GAAP operating margins 13.0 % 10.7 % 12.1 % 11.4 %
Stock-based compensation 7,124 3,158 12,329 5,312
Depreciation and amortization 1,473 2,034 3,324 4,028
Contingent consideration adjustment (1) 60   80   120   160  
Non-GAAP operating income $ 17,493   $ 10,960   $ 31,701   $ 21,304  
Non-GAAP operating margins 25.7 % 20.5 % 24.1 % 20.5 %
Net income:
GAAP net income $ 5,106 $ 3,604 $ 10,806 $ 7,374
Stock-based compensation 7,124 3,158 12,329 5,312
Amortization 134 448 528 895
Contingent consideration adjustment (1) 60   80   120   160  
Non-GAAP net income 12,424 7,290 23,783 13,741
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   $ 0.57  
Non-GAAP diluted earnings per share $ 0.46   $ 0.29   $ 0.90   $ 0.55  
Adjusted Non-GAAP basic earnings per share $ 0.37   $ 0.24   $ 0.74   $ 0.46  
Adjusted Non-GAAP diluted earnings per share $ 0.36   $ 0.23   $ 0.70   $ 0.45  
(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 and six months ended June 30, 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)
       
June 30, 2013 December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 38,560 $ 32,683
Marketable securities 101,820 89,871
Accounts receivable, net of allowance for doubtful accounts of $1,098 and $747, respectively 41,639 42,359
Prepaid commission expense 3,230 2,281
Prepaid expenses and other current assets 9,203 8,042
Deferred income taxes 3,558   7,465  
Total current assets 198,010 182,701
Restricted cash 388
Furniture, fixtures and equipment, net 14,017 10,474
Goodwill 15,087 15,382
Intangible assets, net 1,099 1,708
Deferred income taxes, long-term 10,760 11,055
Other assets 2,347   2,923  
Total assets $ 241,320   $ 224,631  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 1,781 $ 2,998
Accrued payroll and other compensation 12,034 14,140
Accrued expenses and other 9,329 6,674
Deferred revenue 50,431 50,348
Capital lease obligations 56   55  
Total current liabilities 73,631   74,215  
Noncurrent liabilities:
Deferred revenue, less current portion 3,452 4,323
Deferred tax liabilities 280 624
Capital lease obligations, less current portion 72 100
Other long-term liabilities 3,008   3,278  
Total noncurrent liabilities 6,812   8,325  
Total liabilities 80,443   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, 27,235 and 26,405 shares issued; 26,658 and 26,039 shares outstanding, respectively 272 264
Additional paid-in capital 180,106 160,637
Treasury stock, 577 and 366 shares, respectively (16,088 ) (5,626 )
Accumulated other comprehensive loss (1,098 ) (63 )
Accumulated deficit (2,315 ) (13,121 )

Total stockholders' equity

160,877   142,091  

Total liabilities and stockholders' equity

$ 241,320   $ 224,631  

 
 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
   
Six Months Ended June 30,
2013     2012
Cash flows from operating activities:
Net income $ 10,806 $ 7,374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,324 4,028
Stock-based compensation 12,329 5,312
Amortization of discounts or premiums on marketable securities 1,001 601
Deferred income taxes 3,883 3,328
Amortization of debt issuance costs 30 30
Excess tax benefit associated with equity awards (997 ) (677 )
Contingent consideration adjustment 120 160
Provision for doubtful accounts 657 (36 )
Changes in operating assets and liabilities:
Accounts receivable 3,274 (10,631 )
Prepaid commission expense (830 ) (245 )
Prepaid expenses and other current assets 1,153 (2,670 )
Other assets (78 ) (1,406 )
Accounts payable (900 ) (1,238 )
Accrued payroll and other compensation (2,338 ) (708 )
Accrued expenses and other 1,183 656
Deferred revenue (4,140 ) 4,570
Other long-term liabilities 591   (225 )
Net cash provided by operating activities 29,068   8,223  
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (6,761 ) (3,245 )
Purchase of available-for-sale marketable securities (78,255 ) (36,323 )
Proceeds from sale of available-for-sale marketable securities 65,272 43,007
Decrease in restricted cash 388    
Net cash (used in) provided by investing activities (19,356 ) 3,439  
Cash flows from financing activities:
Proceeds from exercise of stock options 6,150 4,636
Excess tax benefit associated with equity awards 997 677
Payment of acquisition-related earn-out (380 ) (251 )
Repayment of obligations under capital leases (27 ) (85 )
Acquisition of treasury stock (10,461 ) (3,128 )
Repayment of notes payable (38 )  
Net cash (used in) provided by financing activities (3,759 ) 1,849  
Net increase in cash and cash equivalents 5,953 13,511
Effect of exchange rate changes on cash and cash equivalents (76 ) (2 )
Cash and cash equivalents - Beginning of period 32,683   45,214  
Cash and cash equivalents - End of period $ 38,560   $ 58,723  

Investor Contact:
Medidata Solutions
Hulus Alpay, 212.419.1025
halpay@mdsol.com
or
Media Contact:
Medidata Solutions
Gail Janowitz, 212.918.1792
gjanowitz@mdsol.com

Source: Medidata Solutions

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