Medidata Solutions, Inc.
02/10/16

Medidata Reports Full-Year and Fourth Quarter 2015 Results

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 2015 and provided detailed financial guidance for the full year 2016.

"With strong sales growth, the two platform deals we signed in the fourth quarter, the addition of over 200 new clients throughout the year and record multi-year backlog growth, we are well positioned for a strong 2016 and beyond," said Tarek Sherif, Medidata's chairman and chief executive officer. "Our business momentum exiting 2015 has positive implications for our strategic position, our long-term growth and for value creation. Investments in our platform capabilities, scale and people are paying off, as more customers select the Medidata Clinical Cloud® as the strategic technology solution to help them accelerate innovation in drug development."

Fourth Quarter 2015 Results

Full-Year 2015 Results

Additional Highlights

"Our solid 2015 performance reflects the strong health in our business, highlighted by 20% organic subscription revenue growth, 41% growth in cash flow from operations, 53% total bookings growth and 20% non-GAAP operating income growth," said Rouven Bergmann, Medidata's chief financial officer. "We enter 2016 with accelerating momentum and remain confident in our ability to achieve our long-term objectives on our path towards becoming a billion-dollar-revenue business."

Financial Outlook

For the full year 2016, 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 Wednesday, February 24, 2016, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 22749885. An archive of the call will also be hosted on the "Investor" section of Medidata's website, 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) For the fourth quarter of 2014, GAAP results and cash flow from operations include a pre-tax charge of $0.9 million associated with a previously disclosed international wire transfer fraud committed against the company and the related investigation costs. For the full year 2014, GAAP results and cash flow from operations include a pre-tax charge of $5.8 million associated with a previously disclosed international wire transfer fraud committed against the company and the related investigation costs.

(2) 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 wire transaction loss. 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, 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.

(3) 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,
2015   2014 2015   2014
Revenues (unaudited) (unaudited)
Subscription $ 84,639 $ 75,736 $ 336,195 $ 280,041
Professional services 14,230   13,476   56,311   55,030  
Total revenues 98,869 89,212 392,506 335,071
Cost of revenues (1)(2)
Subscription 11,479 11,856 47,795 45,576
Professional services 10,429   10,296   41,993   39,344  
Total cost of revenues 21,908 22,152 89,788 84,920
Gross profit 76,961 67,060 302,718 250,151
Operating costs and expenses:
Research and development (1) 23,697 18,980 92,319 71,757
Sales and marketing (1)(2) 27,230 21,274 103,153 83,435
General and administrative (1) 16,359 16,827 78,014 69,111
Wire transaction loss (3)   904     5,784  
Total operating costs and expenses 67,286   57,985   273,486   230,087  
Operating income 9,675 9,075 29,232 20,064
Interest and other income (expense):
Interest expense (4,199 ) (3,911 ) (16,192 ) (15,368 )
Interest income 914 534 2,799 1,814
Other income (expense), net 1   (2 ) (64 ) 4  
Total interest and other expense, net (3,284 ) (3,379 ) (13,457 ) (13,550 )
Income before income taxes 6,391 5,696 15,775 6,514
Provision for income taxes (425 ) 246   2,608   422  
Net income $ 6,816   $ 5,450   $ 13,167   $ 6,092  
Earnings per share:
Basic $ 0.13   $ 0.10   $ 0.25   $ 0.12  
Diluted $ 0.12   $ 0.10   $ 0.23   $ 0.11  
Weighted average common shares outstanding:
Basic 54,020 52,895 53,717 52,561
Diluted 56,768 55,347 56,540 55,247
 
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 1,235 $ 1,142 $ 5,040 $ 4,313
Research and development 2,003 1,368 7,907 4,085
Sales and marketing 2,001 1,839 9,171 7,450
General and administrative 5,840   5,170   26,869   22,105  
Total stock-based compensation $ 11,079   $ 9,519   $ 48,987   $ 37,953  
(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 79 $ 171 $ 517 $ 499
Sales and marketing 30   39   119   129  
Total amortization of intangible assets $ 109   $ 210   $ 636   $ 628  
(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,
2015   2014 2015   2014
Operating income:
GAAP operating income $ 9,675 $ 9,075 $ 29,232 $ 20,064
GAAP operating margins 9.8 % 10.2 % 7.4 % 6.0 %
Stock-based compensation 11,079 9,519 48,987 37,953
Depreciation and amortization 2,881 2,651 10,822 10,435
Wire transaction loss (1)   904     5,784  
Non-GAAP operating income $ 23,635   $ 22,149   $ 89,041   $ 74,236  
Non-GAAP operating margins 23.9 % 24.8 % 22.7 % 22.2 %
Net income:
GAAP net income $ 6,816 $ 5,450 $ 13,167 $ 6,092
Stock-based compensation 11,079 9,519 48,987 37,953
Amortization 109 210 636 628
Wire transaction loss (1) 904 5,784
Non-cash interest expense on convertible senior notes (2) 3,363 3,185 13,180 12,458
Tax impact on add-back items (3) (5,820 ) (5,527 ) (25,121 ) (22,729 )
Adjusted non-GAAP net income $ 15,547   $ 13,741   $ 50,849   $ 40,186  
GAAP basic earnings per share $ 0.13   $ 0.10   $ 0.25   $ 0.12  
GAAP diluted earnings per share $ 0.12   $ 0.10   $ 0.23   $ 0.11  
Adjusted non-GAAP basic earnings per share $ 0.29   $ 0.26   $ 0.95   $ 0.76  
Adjusted non-GAAP diluted earnings per share $ 0.27   $ 0.25   $ 0.90   $ 0.73  
 
(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 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.
(3) 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-month periods ended December 31, 2015 and 2014. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, stock-based compensation expense, and wire transaction loss. Adjusted non-GAAP net income excludes the tax affected impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, wire transaction loss, and non-cash interest expense on convertible senior notes.
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
    December 31, 2015   December 31, 2014
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 49,562 $ 39,517
Marketable securities 220,126 233,284
Accounts receivable, net of allowance for doubtful accounts of $1,992 and $1,517, respectively 90,590 68,475
Prepaid commission expense 1,670 2,819
Prepaid expenses and other current assets 21,165 13,661
Deferred income taxes 88   96  
Total current assets 383,201 357,852
Restricted cash 5,755 5,118
Furniture, fixtures and equipment, net 51,043 38,579
Marketable securities, long-term 209,041 183,842
Goodwill 18,797 19,025
Intangible assets, net 1,172 1,816
Deferred income taxes, long-term 12,128 8,066
Other assets 6,344   7,919  
Total assets $ 687,481   $ 622,217  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,283 $ 3,738
Accrued payroll and other compensation 23,744 15,574
Accrued expenses and other 15,469 12,638
Deferred revenue 75,582   62,890  
Total current liabilities 121,078   94,840  
Noncurrent liabilities:
1.00% convertible senior notes, net 252,788 240,886
Deferred revenue, less current portion 2,993 1,374
Deferred tax liabilities 414 238
Other long-term liabilities 26,052   20,180  
Total noncurrent liabilities 282,247   262,678  
Total liabilities 403,325   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; 59,455 and 56,301 shares issued; 56,311 and 54,413 shares outstanding, respectively 594 563
Additional paid-in capital 364,973 301,465
Treasury stock, 3,144 and 1,888 shares, respectively (100,806 ) (45,049 )
Accumulated other comprehensive loss (3,404 ) (1,912 )
Retained earnings 22,799   9,632  
Total stockholders' equity 284,156   264,699  
Total liabilities and stockholders' equity $ 687,481   $ 622,217  
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
    Year Ended December 31,
2015   2014
Cash flows from operating activities: (unaudited)
Net income $ 13,167 $ 6,092
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,822 10,435
Stock-based compensation 48,987 37,953
Amortization of discounts or premiums on marketable securities 4,754 5,611
Deferred income taxes (3,209 ) (10,865 )
Amortization of debt issuance costs 1,278 1,277
Amortization of debt discount 11,902 11,181
Excess tax benefit associated with equity awards (1,622 ) (5,829 )
Provision for doubtful accounts 597 648
Loss on fixed asset disposal 3
Changes in operating assets and liabilities:
Accounts receivable (34,513 ) (30,549 )
Prepaid commission expense 439 1,344
Prepaid expenses and other current assets (9,058 ) (611 )
Other assets 2,715 2,910
Accounts payable (502 ) 1,310
Accrued payroll and other compensation 6,014 (2,510 )
Accrued expenses and other 712 6,103
Deferred revenue 28,617 19,419
Other long-term liabilities 5,872   7,694  
Net cash provided by operating activities 86,972   61,616  
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (19,017 ) (15,815 )
Purchase of available-for-sale marketable securities (264,113 ) (241,204 )
Proceeds from sale of available-for-sale marketable securities 246,423 231,816
Acquisition of business, net of cash acquired (5,467 )
Net (increase) decrease in restricted cash (791 ) 226  
Net cash used in investing activities (37,498 ) (30,444 )
Cash flows from financing activities:
Proceeds from exercise of stock options 6,686 4,328
Proceeds from employee stock purchase plan 6,009 5,416
Excess tax benefit associated with equity awards 1,622 5,829
Payment of acquisition-related earn-out (704 )
Repayment of obligations under capital leases (46 ) (54 )
Acquisition of treasury stock (53,582 ) (28,593 )
Repayment of notes payable (62 ) (85 )
Net cash used in financing activities (39,373 ) (13,863 )
Effect of exchange rate changes on cash and cash equivalents (56 ) (120 )
Net increase in cash and cash equivalents 10,045 17,189
Cash and cash equivalents - Beginning of period 39,517   22,328  
Cash and cash equivalents - End of period $ 49,562   $ 39,517  
 

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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