Medidata Solutions, Inc.
04/23/15

Medidata Reports Record First Quarter 2015 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 first quarter of 2015.

"Our strong execution and business momentum in the first quarter drove record financial and operational results, as the life sciences industry expands its use of the Medidata Clinical Cloud®," said Tarek Sherif, Medidata's chairman and chief executive officer. "Our cloud-based platform and growing data analytics capabilities are being used by over 500 companies to accelerate drug development - helping to develop eight of the top 10 best-selling drugs globally in 2014. Our increasing operating leverage and profitability allow us to make targeted investments in our business, as we continue to focus on innovation and execution in order to capitalize on substantial growth opportunities in 2015 and beyond."

First Quarter 2015 Results

Additional Highlights

"The first quarter was a strong start to the year as the momentum we experienced in January continued throughout Q1, as reflected in our sequential revenue growth," said Cory Douglas, Medidata's chief financial officer. "For the full year 2015, we continue to expect increased profitability, operating margin expansion and record cash flows, while continuing to invest in our business."

Financial Outlook

For the full year 2015, the Company's guidance provided on February 5, 2015 remains unchanged:

Conference Call

The company plans to host its investor conference call today at 8:00 a.m. Eastern time to discuss its first quarter financial results and the hiring of Rouven Bergmann who will be joining the company as Chief Financial Officer effective May 18, 2015, which was separately announced today. 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, May 7, 2015, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 16539923. 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, 2014. 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) 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, and stock-based compensation expense. Adjusted non-GAAP net income excludes the impact of tax-affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, 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.

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

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
 
      Three Months Ended March 31,
2015     2014
Revenues
Subscription $ 78,749 $ 63,811
Professional services 13,691   12,829  
Total revenues 92,440 76,640
Cost of revenues (1)(2)
Subscription 11,473 11,086
Professional services 10,703   9,713  
Total cost of revenues 22,176 20,799
Gross profit 70,264 55,841
Operating costs and expenses
Research and development (1) 21,911 17,789
Sales and marketing (1)(2) 24,318 20,732
General and administrative (1) 20,569   17,046  
Total operating costs and expenses 66,798   55,567  
Operating income 3,466 274
Interest and other income (expense)
Interest expense (3,958 ) (3,781 )
Interest income 534 395
Other (expense) income, net (34 ) 34  
Total interest and other expense, net (3,458 ) (3,352 )
Income (loss) before income taxes 8 (3,078 )
Provision for income taxes (149 ) (1,263 )
Net income (loss) $ 157   $ (1,815 )
Earnings (loss) per share
Basic $ 0.00   $ (0.03 )
Diluted $ 0.00   $ (0.03 )
Weighted average common shares outstanding
Basic 53,257 52,109
Diluted 55,658 52,109
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 1,248 $ 1,072
Research and development 1,786 912
Sales and marketing 2,367 2,351
General and administrative 6,269   5,364  
Total stock-based compensation $ 11,670   $ 9,699  
(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 179 $ 108
Sales and marketing 29   30  
Total amortization of intangible assets $ 208   $ 138  
 

 
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 March 31,
2015     2014
Operating income:
GAAP operating income $ 3,466 $ 274
GAAP operating margins 3.7 % 0.4 %
Stock-based compensation 11,670 9,699
Depreciation and amortization 2,553   2,535  
Non-GAAP operating income $ 17,689   $ 12,508  
Non-GAAP operating margins 19.1 % 16.3 %
Net income:
GAAP net income (loss) $ 157 $ (1,815 )
Stock-based compensation 11,670 9,699
Amortization 208 138
Non-cash interest expense on convertible senior notes (1) 3,228 3,060
Tax impact on add-back items (2) (6,042 ) (5,159 )
Adjusted non-GAAP net income $ 9,221   $ 5,923  
GAAP basic earnings (loss) per share $ 0.00   $ (0.03 )
GAAP diluted earnings (loss) per share $ 0.00   $ (0.03 )
Adjusted Non-GAAP basic earnings per share $ 0.17   $ 0.11  
Adjusted Non-GAAP diluted earnings per share $ 0.17   $ 0.11  

(1) 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.

(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, 2015 and 2014. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, and stock-based compensation expense. Adjusted non-GAAP net income excludes the impact of tax affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, and non-cash interest expense on convertible senior notes.

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except per share data)
 
      March 31, 2015     December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents $ 71,472 $ 39,517
Marketable securities 226,136 233,284
Accounts receivable, net of allowance for doubtful accounts of $1,695 and $1,517, respectively 80,358 68,475
Prepaid commission expense 2,155 2,819
Prepaid expenses and other current assets 14,725 13,661
Deferred income taxes 97   96  
Total current assets 394,943 357,852
Restricted cash 5,118 5,118
Furniture, fixtures and equipment, net 39,664 38,579
Marketable securities, long-term 168,165 183,842
Goodwill 18,808 19,025
Intangible assets, net 1,595 1,816
Deferred income taxes, long-term 7,771 8,066
Other assets 7,995   7,919  
Total assets $ 644,059   $ 622,217  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,254 $ 3,738
Accrued payroll and other compensation 12,896 15,574
Accrued expenses and other 13,330 12,638
Deferred revenue 74,826   62,890  
Total current liabilities 107,306   94,840  
Noncurrent liabilities:
1.00% convertible senior notes, net 243,795 240,886
Deferred revenue, less current portion 1,346 1,374
Deferred tax liabilities 241 238
Other long-term liabilities 19,983   20,180  
Total noncurrent liabilities 265,365   262,678  
Total liabilities 372,671   357,518  
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 shares authorized, 57,280 and

56,301 shares issued; 55,182 and 54,413 shares outstanding, respectively

573 563
Additional paid-in capital 317,042 301,465
Treasury stock, 2,098 and 1,888 shares, respectively (53,671 ) (45,049 )
Accumulated other comprehensive loss (2,345 ) (1,912 )
Retained earnings 9,789   9,632  
Total stockholders' equity 271,388   264,699  
Total liabilities and stockholders' equity $ 644,059   $ 622,217  
 

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
 
      Three Months Ended March 31,
2015     2014
Cash flows from operating activities
Net income (loss) $ 157 $ (1,815 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 2,553 2,535
Stock-based compensation 11,670 9,699
Amortization of discounts or premiums on marketable securities 1,309 1,431
Deferred income taxes 683 (1,643 )
Amortization of debt issuance costs 319 319
Amortization of debt discount 2,909 2,741
Excess tax benefit associated with equity awards (215 ) (71 )
Provision for doubtful accounts 300 100
Changes in operating assets and liabilities:
Accounts receivable (16,643 ) (25,550 )
Prepaid commission expense (46 ) (499 )
Prepaid expenses and other current assets (2,425 ) 1,485
Other assets 1,676 137
Accounts payable 2,755 1,083
Accrued payroll and other compensation (4,043 ) (9,260 )
Accrued expenses and other (272 ) 832
Deferred revenue 16,375 10,653
Other long-term liabilities (197 ) 1,537  
Net cash provided by (used in) operating activities 16,865   (6,286 )
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (3,451 ) (7,048 )
Purchase of available-for-sale securities (49,724 ) (46,249 )
Proceeds from sale of available-for-sale securities 71,833   80,730  
Net cash provided by investing activities 18,658   27,433  
Cash flows from financing activities
Proceeds from exercise of stock options 3,702 1,079
Proceeds from employee stock purchase plan 1,519 1,327
Excess tax benefit associated with equity awards 215 71
Payment of acquisition-related earn-out (704 )
Repayment of obligations under capital leases (9 ) (30 )
Acquisition of treasury stock (8,928 ) (19,789 )
Repayment of notes payable   (41 )
Net cash used in financing activities (3,501 ) (18,087 )
Effect of exchange rate changes on cash and cash equivalents (67 ) 18  
Net increase in cash and cash equivalents 31,955 3,078
Cash and cash equivalents - Beginning of period 39,517   22,328  
Cash and cash equivalents - End of period $ 71,472   $ 25,406  
 

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

Source: Medidata Solutions

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