Medidata Solutions, Inc.
04/21/16

Medidata Reports Record First Quarter 2016 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 first quarter of 2016.

"We had a good start to the year with revenue and profitability for the first quarter coming in ahead of our expectations," said Tarek Sherif, Medidata's chairman and chief executive officer. "Bristol-Myers Squibb becoming the 17th top 25 global pharma to select the Medidata Clinical Cloud as its platform of choice for driving innovation is a great accomplishment, further expanding our market share of leading global pharma clients. We are excited about the positive trends we see in life sciences and continue to execute on our plans for creating value by adding innovative solutions to our industry leading platform at an accelerating pace."

First Quarter 2016 Results

Additional Highlights

"Our strong first quarter performance, continued market share gains and increased customer platform adoption clearly show that our strategy is working," said Rouven Bergmann, Medidata's chief financial officer. "With the acquisition of our new digital image processing business, plus our emerging data analytics and digital payments business, we continue to prudently invest in future growth drivers to achieve our short and long-term goals."

Financial Outlook

For the full year 2016, the Company's guidance provided on February 10, 2016 remains unchanged:

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 website 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 website at http://investor.mdsol.com. A replay of the conference call can be accessed until Thursday, May 5, 2016, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 78587438. 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. We are committed to advancing the competitive and scientific goals of our life sciences customers worldwide: more than 600 global pharmaceutical companies; innovative biotech, diagnostic and device firms; leading academic medical centers; and contract research organizations. Our industry-leading technology platform, the Medidata Clinical Cloud®, is the primary technology solution powering clinical trials for 17 of the world's top 25 global pharmaceutical companies, bringing new levels of productivity and quality to the clinical testing of promising medical treatments, from study design and planning through execution, management and reporting.

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, 2015. 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 tax-affected impact of 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 and an immaterial amount of backlog from the acquisition of Intelemage on April 1, 2016.

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

Three Months Ended
March 31,

2016     2015
Revenues
Subscription $ 89,968 $ 78,749
Professional services 14,270   13,691  
Total revenues 104,238 92,440
Cost of revenues (1)(2)
Subscription 14,329 11,473
Professional services 10,339   10,703  
Total cost of revenues 24,668 22,176
Gross profit 79,570 70,264
Operating costs and expenses
Research and development (1) 28,228 21,911
Sales and marketing (1)(2) 25,458 24,318
General and administrative (1) 19,246   20,569  
Total operating costs and expenses 72,932   66,798  
Operating income 6,638 3,466
Interest and other income (expense)
Interest expense (4,127 ) (3,958 )
Interest income 872 534
Other expense, net (4 ) (34 )
Total interest and other expense, net (3,259 ) (3,458 )
Income before income taxes 3,379 8
Provision for income taxes (2,469 ) (149 )
Net income $ 5,848   $ 157  
Earnings per share
Basic $ 0.11   $ 0.00  
Diluted $ 0.10   $ 0.00  
Weighted average common shares outstanding
Basic 55,119 53,257
Diluted 56,365 55,658
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 1,210 $ 1,248
Research and development 2,194 1,786
Sales and marketing 1,877 2,367
General and administrative 4,969   6,269  
Total stock-based compensation $ 10,250   $ 11,670  
(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 79 $ 179
Sales and marketing 24   29  
Total amortization of intangible assets $ 103   $ 208  
 

 

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,

2016     2015
Operating income:
GAAP operating income $   6,638 $   3,466
GAAP operating margins 6.4 % 3.7 %
Stock-based compensation 10,250 11,670
Depreciation and amortization 3,217   2,553  
Non-GAAP operating income $   20,105   $   17,689  
Non-GAAP operating margins 19.3 % 19.1 %
Net income:
GAAP net income $ 5,848 $ 157
Stock-based compensation 10,250 11,670
Amortization 103 208
Non-cash interest expense on convertible senior notes (1) 3,408 3,228
Tax impact on add-back items (2) (5,504 ) (6,042 )
Adjusted non-GAAP net income $   14,105   $   9,221  
GAAP basic earnings per share $   0.11   $   0.00  
GAAP diluted earnings per share $   0.10   $   0.00  
Adjusted Non-GAAP basic earnings per share $   0.26   $   0.17  
Adjusted Non-GAAP diluted earnings per share $   0.25   $   0.17  

(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, 2016 and 2015. 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 tax-affected impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, and non-cash interest expense on convertible senior notes.
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
 
 
  March 31, 2016     December 31, 2015
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $   87,669 $ 49,562
Marketable securities 235,859 220,126
Accounts receivable, net of allowance for doubtful accounts of $1,758 and $1,992, respectively 77,654 90,590
Prepaid commission expense 2,472 1,670
Prepaid expenses and other current assets 19,469 21,165
Deferred income taxes 94   88  
Total current assets 423,217 383,201
Restricted cash 5,756 5,755
Furniture, fixtures and equipment, net 51,919 51,043
Marketable securities, long-term 153,096 209,041
Goodwill 18,662 18,797
Intangible assets, net 1,067 1,172
Deferred income taxes, long-term 12,144 12,128
Other assets (1) 8,065   3,043  
Total assets (1) $   673,926   $ 684,180  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,918 $ 6,283
Accrued payroll and other compensation 13,472 23,744
Accrued expenses and other 13,804 15,469
Deferred revenue 71,031   75,582  
Total current liabilities 100,225   121,078  
Noncurrent liabilities:
1.00% convertible senior notes, net (1) 252,895 249,487
Deferred revenue, less current portion 2,748 2,993
Deferred tax liabilities 429 414
Other long-term liabilities 23,276   26,052  
Total noncurrent liabilities (1) 279,348   278,946  
Total liabilities (1) 379,573   400,024  
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; 60,669 and
59,455 shares issued; 57,213 and 56,311 shares outstanding, respectively

606 594
Additional paid-in capital 376,747 364,973
Treasury stock, 3,456 and 3,144 shares, respectively (109,464 ) (100,806 )
Accumulated other comprehensive loss (2,183 ) (3,404 )
Retained earnings 28,647   22,799  
Total stockholders' equity 294,353   284,156  
Total liabilities and stockholders' equity (1) $   673,926   $ 684,180  
(1)   As of December 31, 2015, $3.3 million of unamortized debt issuance costs have been reclassified from other assets to 1.00% convertible senior notes, net, in order to conform to current period presentation. This change is in conjunction with the 2016 adoption of recently issued accounting guidance which requires unamortized debt issuance costs to be presented as a reduction of the carrying amount of the associated debt.
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
 
  Three Months Ended March 31,
2016     2015
Cash flows from operating activities
Net income $ 5,848 $ 157
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,217 2,553
Stock-based compensation 10,250 11,670
Amortization of discounts or premiums on marketable securities 983 1,309
Deferred income taxes (86 ) 683
Amortization of debt issuance costs 319 319
Amortization of debt discount 3,089 2,909
Excess tax benefit associated with equity awards (1,341 ) (215 )
Provision for doubtful accounts 371 300
Loss on fixed asset disposal 4
Changes in operating assets and liabilities:
Accounts receivable 4,635 (16,643 )
Prepaid commission expense (2,738 ) (46 )
Prepaid expenses and other current assets 1,199 (2,425 )
Other assets (2,590 ) 1,676
Accounts payable (1,297 ) 2,755
Accrued payroll and other compensation (10,052 ) (4,043 )
Accrued expenses and other 238 (272 )
Deferred revenue 3,134 16,375
Other long-term liabilities (2,720 ) (197 )
Net cash provided by operating activities 12,463   16,865  
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (7,589 ) (3,451 )
Purchase of available-for-sale securities (28,815 ) (49,724 )
Proceeds from sale of available-for-sale securities 69,352   71,833  
Net cash provided by investing activities 32,948   18,658  
Cash flows from financing activities
Proceeds from exercise of stock options 194 3,702
Proceeds from employee stock purchase plan 1,819 1,519
Excess tax benefit associated with equity awards 1,341 215
Repayment of obligations under capital leases (9 )
Acquisition of treasury stock (10,831 ) (8,928 )
Net cash used in financing activities (7,477 ) (3,501 )
Effect of exchange rate changes on cash and cash equivalents 173   (67 )
Net increase in cash and cash equivalents 38,107 31,955
Cash and cash equivalents - beginning of period 49,562   39,517  
Cash and cash equivalents - end of period $ 87,669   $ 71,472  
 

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

Source: Medidata Solutions, Inc.

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