Medidata Solutions, Inc.
02/05/15

Medidata Reports Record Full Year and Fourth Quarter 2014 Revenues

NEW YORK--(BUSINESS WIRE)-- Medidata (NASDAQ:MDSO), the leading global provider of cloud-based solutions for clinical research in life sciences, today announced its financial results for the fourth quarter and full year 2014 and provided detailed financial guidance for the full year 2015.

"Operationally, we executed well in 2014, as reflected in our financial performance, accelerating pace of innovation and higher customer satisfaction. We are at the beginning of a renaissance in drug discovery with numerous next generation life-enhancing drugs coming to market. New technology is supporting the complex science required to develop these drugs and Medidata's platform is playing an ever increasing role," said Tarek Sherif, Medidata's chairman and chief executive officer. "While we closed a record amount of business in the fourth quarter, we also continue to make progress on the many significant opportunities in our pipeline and are entering 2015 with good momentum. Given our strong start in January, including closing a key platform deal with a top 30 life sciences company, I have confidence that 2015 will be another year of strong revenue growth and that our long term prospects are excellent."

Fourth Quarter 2014 Results

Full Year 2014 Results

Additional Highlights

"In 2014, we had another year of healthy revenue growth, good profitability and strong operating margins, while making significant investments to drive the future growth of our business. For the full year we achieved revenue growth that was within our long term targets despite encountering timing delays on key deals in our pipeline. 2014 represents our sixth consecutive year of delivering industry-leading profit margins relative to our SaaS peers," said Cory Douglas, Medidata's chief financial officer. "Our plans for 2015 include delivering increased profitability, operating margin expansion and record cash flow, while continuing to invest in our business."

Financial Outlook

For the full year 2015, the company now expects:

Conference Call

The company plans to host its investor conference call today at 8:00 a.m. Eastern time. 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, February 19, 2015, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 65640666. 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

Medidata 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, 2013. 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.

(1) For the fourth quarter of 2014, GAAP results and cash flow from operations include a pre-tax charge of $0.9 million for costs associated with the previously announced international wire transfer fraud committed against the company. For the full year 2014, GAAP results and cash flow from operations include a pre-tax charge of $5.8 million associated with the previously mentioned wire transaction loss. For additional details, refer to our Current Report on Form 8-K filed on September 25, 2014 and Quarterly Report on Form 10-Q filed November 7, 2014.

(2) The fourth quarter of 2013 US GAAP results include $9.3 million of stock-based compensation expense for the full year impact relating to long-term performance-based restricted stock units (units). These units contain performance targets based on Medidata's three-year compound annual revenue growth rate and total stockholder return. The recognition of expense for these units was based upon management's assessment of the probability of achieving the predetermined performance targets and estimate of the number of performance shares that will ultimately be earned on December 31, 2015. The $9.3 million of stock-based compensation expense represented approximately one-third of the estimated value of these units as of December 31, 2013. During each quarter in 2014, management continued to reassess the number of performance shares ultimately expected to be paid, adjusted the expense to date for any changes in the estimate, and recorded the remaining unrecognized expense prospectively on a straight-line basis over the remaining vesting period of the grants.

(3) 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, wire transaction loss, 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, wire transaction loss, an adjustment to the fair value of contingent consideration, and non-cash interest expense on convertible senior notes. 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, amortization and other non-cash charges, such as share-based compensation, and management believes, based on discussions with investors, that these non-GAAP measures enhance investors' ability to assess Medidata's historical and projected 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.

(4) Adjusted subscription backlog equals subscription backlog plus outstanding intra-year renewals.

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2014     2013   2014     2013  
Revenues (unaudited) (unaudited)
Subscription $ 75,736 $ 62,977 $ 280,041 $ 227,921
Professional services 13,476   11,598   55,030   48,928  
Total revenues 89,212 74,575 335,071 276,849
Cost of revenues (1)(2)
Subscription 11,856 9,735 45,576 37,053
Professional services 10,296   8,863   39,344   32,856  
Total cost of revenues 22,152 18,598 84,920 69,909
Gross profit 67,060 55,977 250,151 206,940
Operating costs and expenses:
Research and development (1) 18,980 14,062 71,757 51,202
Sales and marketing (1)(2) 21,274 20,150 83,435 66,337
General and administrative (1) 16,827 23,281 69,111 65,513
Wire transaction loss (3) 904     5,784    
Total operating costs and expenses 57,985   57,493   230,087   183,052  
Operating income (loss) 9,075 (1,516 ) 20,064 23,888
Interest and other income (expense):
Interest expense (3,911 ) (3,747 ) (15,368 ) (5,925 )
Interest income 534 311 1,814 555
Other (expense) income, net (2 ) (54 ) 4   (136 )
Total interest and other expense, net (3,379 ) (3,490 ) (13,550 ) (5,506 )
Income (loss) before income taxes 5,696 (5,006 ) 6,514 18,382
Provision for income taxes 246   (5,588 ) 422   1,721  
Net income $ 5,450   $ 582   $ 6,092   $ 16,661  
Earnings per share:
Basic $ 0.10   $ 0.01   $ 0.12   $ 0.33  
Diluted $ 0.10   $ 0.01   $ 0.11   $ 0.31  
Weighted average common shares outstanding:
Basic 52,895 51,685 52,561 51,060
Diluted 55,347 54,825 55,247 54,118
 
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 1,142 $ 1,159 $ 4,313 $ 3,149
Research and development 1,368 858 4,085 2,397
Sales and marketing 1,839 4,318 7,450 8,859
General and administrative 5,170   10,363   22,105   21,738  
Total stock-based compensation $ 9,519   $ 16,698   $ 37,953   $ 36,143  
(2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 171 $ 105 $ 499 $ 589
Sales and marketing 39   36   129   215  
Total amortization of intangible assets $ 210   $ 141   $ 628   $ 804  

 

(3) Operating costs and expenses for the three and twelve months ended December 31, 2014 include pre-tax charges of $0.9 million and $5.8 million, respectively, associated with a previously announced international wire transfer fraud committed against the company and the related investigation costs. For additional details, refer to our Current Report on Form 8-K filed September 25, 2014 and Quarterly Report on Form 10- Q filed November 7, 2014.

 
MEDIDATA SOLUTIONS, INC.
Reconciliation of GAAP Operating Income and GAAP Net Income to

Non-GAAP Operating 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,

2014     2013   2014     2013  
Operating income:
GAAP operating income $ 9,075 $ (1,516 ) $ 20,064 $ 23,888
GAAP operating margins 10.2 % (2.0 )% 6.0 % 8.6 %
Stock-based compensation 9,519 16,698 37,953 36,143
Depreciation and amortization 2,651 2,048 10,435 6,936
Wire transaction loss (1) 904 5,784
Contingent consideration adjustment (2)   59     239  
Non-GAAP operating income $ 22,149   $ 17,289   $ 74,236   $ 67,206  
Non-GAAP operating margins 24.8 % 23.2 % 22.2 % 24.3 %
Net income:
GAAP net income $ 5,450 $ 582 $ 6,092 $ 16,661
Stock-based compensation 9,519 16,698 37,953 36,143
Amortization 210 141 628 804
Wire transaction loss (1) 904 5,784
Contingent consideration adjustment (2) 59 239
Non-cash interest expense on convertible senior notes (3) 3,185 3,019 12,458 4,715
Tax impact on add-back items (4) (5,527 ) (7,966 ) (22,729 ) (16,760 )
Adjusted non-GAAP net income $ 13,741   $ 12,533   $ 40,186   $ 41,802  
GAAP basic earnings per share $ 0.10   $ 0.01   $ 0.12   $ 0.33  
GAAP diluted earnings per share $ 0.10   $ 0.01   $ 0.11   $ 0.31  
Adjusted non-GAAP basic earnings per share $ 0.26   $ 0.24   $ 0.76   $ 0.82  
Adjusted non-GAAP diluted earnings per share $ 0.25   $ 0.23   $ 0.73   $ 0.77  
 

(1) Amount represents pre-tax charges associated with a previously announced international wire transfer fraud committed against the company and the related investigation costs. We exclude these amounts for the purposes of calculating non-GAAP operating income and adjusted non-GAAP net income. We believe that excluding this loss from our non-GAAP measures is useful to investors because it is not indicative of our continuing operations or meaningful when comparing current results to past results.

(2) Amount represents the effect of changes in fair value of contingent consideration liability.

(3) Amount represents non-cash interest expense, including amortization of debt discount and issuance costs, on our 1.00% convertible senior notes issued during the third quarter of 2013. We exclude this incremental non-cash interest expense for purposes of calculating adjusted non- GAAP net income. We believe that excluding these expenses from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not generate a cash outflow for the company and the debt issuance costs do not represent a cash outflow for the company except in the period the notes were issued; therefore both are not indicative of our continuing operations.

(4) 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 twelve months ended December 31, 2014 and 2013. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, stock-based compensation expense, wire transaction loss, 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, wire transaction loss, adjustment to the fair value of contingent consideration, and non-cash interest expense on convertible senior notes.

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
  December 31, 2014   December 31, 2013
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 39,517 $ 22,328
Marketable securities 233,284 218,892

Accounts receivable, net of allowance for doubtful accounts of $1,517 and $1,055,
respectively

68,475 45,534
Prepaid commission expense 2,819 3,615
Prepaid expenses and other current assets 13,661 13,511
Deferred income taxes 96   665  
Total current assets 357,852 304,545
Restricted cash 5,118 5,118
Furniture, fixtures and equipment, net 38,579 41,229
Marketable securities, long-term 183,842 195,105
Goodwill 19,025 15,487
Intangible assets, net 1,816 904
Deferred income taxes, long-term 8,066 345
Other assets 7,919   10,620  
Total assets $ 622,217   $ 573,353  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,738 $ 7,524
Accrued payroll and other compensation 15,574 27,773
Accrued expenses and other 12,638 12,265
Deferred revenue 62,890   52,628  
Total current liabilities 94,840   100,190  
Noncurrent liabilities:
1.00% convertible senior notes, net 240,886 229,705
Deferred revenue, less current portion 1,374 1,430
Deferred tax liabilities 238 5,651
Other long-term liabilities 20,180   10,564  
Total noncurrent liabilities 262,678   247,350  
Total liabilities 357,518   347,540  
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; 200,000 and 100,000 shares
authorized, 56,301 and 55,018 shares issued; 54,413 and 53,634 shares
outstanding, respectively

563 550
Additional paid-in capital 301,465 248,336
Treasury stock, 1,888 and 1,384 shares, respectively (45,049 ) (26,414 )
Accumulated other comprehensive loss (1,912 ) (199 )
Retained earnings 9,632   3,540  
Total stockholders' equity 264,699   225,813  
Total liabilities and stockholders' equity $ 622,217   $ 573,353  
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
  Year Ended December 31,
2014     2013  
Cash flows from operating activities: (unaudited)
Net income $ 6,092 $ 16,661
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,435 6,936
Stock-based compensation 37,953 36,143
Amortization of discounts or premiums on marketable securities 5,611 3,075
Deferred income taxes (10,865 ) (816 )
Amortization of debt issuance costs 1,277 577
Amortization of debt discount 11,181 4,182
Excess tax benefit associated with equity awards (5,829 ) (4,531 )
Contingent consideration adjustment 239
Provision for doubtful accounts 648 657
Loss on fixed asset disposal 3 241
Changes in operating assets and liabilities:
Accounts receivable (30,549 ) 1,249
Prepaid commission expense 1,344 (535 )
Prepaid expenses and other current assets (611 ) 2,099
Other assets 2,910 (3,697 )
Accounts payable 1,310 (457 )
Accrued payroll and other compensation (2,510 ) 3,614
Accrued expenses and other 6,103 7,728
Deferred revenue 19,419 (5,465 )
Other long-term liabilities 7,694   1,697  
Net cash provided by operating activities 61,616   69,597  
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (15,815 ) (30,505 )
Purchase of available-for-sale marketable securities (241,204 ) (446,745 )
Proceeds from sale of available-for-sale marketable securities 231,816 119,470
Acquisition of business, net of cash acquired (5,467 )
Net decrease (increase) in restricted cash 226   (4,956 )
Net cash used in investing activities (30,444 ) (362,736 )
Cash flows from financing activities:
Proceeds from exercise of stock options 4,328 10,452
Proceeds from employee stock purchase plan 5,416
Excess tax benefit associated with equity awards 5,829 4,531
Payment of acquisition-related earn-out (704 ) (380 )
Repayment of obligations under capital leases (54 ) (75 )
Proceeds from issuance of convertible senior notes 287,500
Payment of costs associated with issuance of convertible senior notes (8,144 )
Acquisition of treasury stock (28,593 ) (10,828 )
Repayment of notes payable (85 ) (249 )
Net cash (used in) provided by financing activities (13,863 ) 282,807  
Effect of exchange rate changes on cash and cash equivalents (120 ) (23 )
Net increase (decrease) in cash and cash equivalents 17,189 (10,355 )
Cash and cash equivalents - Beginning of period 22,328   32,683  
Cash and cash equivalents - End of period $ 39,517   $ 22,328  
 

Medidata Solutions
Investor:
Hulus Alpay, 212-419-1025
halpay@mdsol.com
or
Media:
Nicole Pariser, 212-659-1069
npariser@mdsol.com

Source: Medidata

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