Medidata Solutions, Inc.
07/20/16

Medidata Reports Record Second 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 second quarter of 2016.

"Our second quarter results come from strong execution across the Company and reflect Medidata's momentum in driving adoption of our integrated cloud platform," said Tarek Sherif, Medidata's chairman and chief executive officer. "With demand growing for Medidata CTMS, Payments, Balance and mHealth, as well as data analytics, we're building on the success of the broadest platform in the industry, while continually delivering greater value to our clients. Today, more than ever, our ability to generate sustainable, long-term growth is driven by the large opportunity created by our clients' innovation, scientific advances and our mission of powering smarter treatments to improve healthcare. It's clear that Medidata is becoming the strategic technology partner to a massive and important transformation in life sciences and healthcare driven by digital automation in drug development."

Second Quarter 2016 Results

Additional Highlights

"Our strong second quarter performance reflects continued execution and growth across all segments of our business," said Rouven Bergmann, Medidata's chief financial officer. "Our strategy is working as the industry looks to Medidata as the most strategic cloud technology partner in clinical development. Our strong year-to-date results, continued momentum, and record professional services demand provide us with increased visibility and confidence in our full-year revenue and profitability expectations."

Financial Outlook

For the full-year 2016, the Company is maintaining its previously stated total revenue and profitability guidance ranges, as follows:

The operating and net income measures above reflect the Company's non-GAAP financial guidance and the corresponding GAAP equivalents to its guidance.

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 Wednesday, August 3, 2016, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 40485281. 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 700 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) Adjusted subscription backlog equals subscription backlog plus outstanding intra-year renewals valued at an amount equal to the contracts to be renewed.

(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, 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.

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
 
    Three Months Ended June 30,     Six Months Ended June 30,
2016     2015     2016     2015
Revenues
Subscription $ 96,760 $ 83,929 $ 186,728 $ 162,678
Professional services 17,850   14,155   32,120   27,846  
Total revenues 114,610 98,084 218,848 190,524
Cost of revenues (1)(2)
Subscription 15,600 12,354 29,929 23,827
Professional services 13,457   10,557   23,796   21,260  
Total cost of revenues 29,057 22,911 53,725 45,087
Gross profit 85,553 75,173 165,123 145,437
Operating costs and expenses
Research and development (1) 28,267 22,519 56,495 44,430
Sales and marketing (1)(2) 27,609 25,724 53,067 50,042
General and administrative (1) 18,531   21,943   37,777   42,512  
Total operating costs and expenses 74,407   70,186   147,339   136,984  
Operating income 11,146 4,987 17,784 8,453
Interest and other income (expense)
Interest expense (4,183 ) (3,997 ) (8,310 ) (7,955 )
Interest income 932 612 1,804 1,146
Other income (expense), net 3   (34 ) (1 ) (68 )
Total interest and other expense, net (3,248 ) (3,419 ) (6,507 ) (6,877 )
Income before income taxes 7,898 1,568 11,277 1,576
Provision for income taxes 2,961   55   492   (94 )
Net income $ 4,937   $ 1,513   $ 10,785   $ 1,670  
Earnings per share
Basic $ 0.09   $ 0.03   $ 0.20   $ 0.03  
Diluted $ 0.09   $ 0.03   $ 0.19   $ 0.03  
Weighted average common shares outstanding
Basic 55,392 53,647 55,255 53,453
Diluted 56,604 56,191 56,594 56,050


(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:

Cost of revenues $ 1,239 $ 1,311 $ 2,449 $ 2,559
Research and development 2,323 2,013 4,517 3,799
Sales and marketing 1,839 2,460 3,716 4,827
General and administrative 5,046   8,352   10,015   14,621  
Total stock-based compensation   $ 10,447   $ 14,136   $ 20,697   $ 25,806  


(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows:

Cost of revenues $ 314 $ 180 $ 393 $ 359
Sales and marketing 85   30   109   59  
Total amortization of intangible assets   $ 399   $ 210   $ 502   $ 418  
 

 

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 June 30,     Six Months Ended June 30,
2016     2015     2016     2015
Operating income:
GAAP operating income $ 11,146 $ 4,987 $ 17,784 $ 8,453
GAAP operating margins 9.7 % 5.1 % 8.1 % 4.4 %
Stock-based compensation 10,447 14,136 20,697 25,806
Depreciation and amortization 3,766   2,637   6,983   5,190  
Non-GAAP operating income $ 25,359   $ 21,760   $ 45,464   $ 39,449  
Non-GAAP operating margins 22.1 % 22.2 % 20.8 % 20.7 %
Net income:
GAAP net income $ 4,937 $ 1,513 $ 10,785 $ 1,670
Stock-based compensation 10,447 14,136 20,697 25,806
Amortization 399 210 502 418
Non-cash interest expense on convertible senior notes (1) 3,455 3,273 6,863 6,501
Tax impact on add-back items (2) (5,721 ) (7,048 ) (11,225 ) (13,090 )
Adjusted non-GAAP net income $ 13,517   $ 12,084   $ 27,622   $ 21,305  
GAAP basic earnings per share $ 0.09   $ 0.03   $ 0.20   $ 0.03  
GAAP diluted earnings per share $ 0.09   $ 0.03   $ 0.19   $ 0.03  
Adjusted Non-GAAP basic earnings per share $ 0.24   $ 0.23   $ 0.50   $ 0.40  
Adjusted Non-GAAP diluted earnings per share $ 0.24   $ 0.22   $ 0.49   $ 0.38  
(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 and six months ended June 30, 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)
 
    June 30, 2016     December 31, 2015
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 64,346 $ 49,562
Marketable securities 253,930 220,126
Accounts receivable, net of allowance for doubtful accounts of $1,989 and $1,992, respectively 90,433 90,590
Prepaid commission expense 2,665 1,670
Prepaid expenses and other current assets 17,546 21,165
Deferred income taxes 102   88  
Total current assets 429,022 383,201
Restricted cash 5,758 5,755
Furniture, fixtures and equipment, net 54,683 51,043
Marketable securities, long-term 164,596 209,041
Goodwill 30,320 18,797
Intangible assets, net 5,887 1,172
Deferred income taxes, long-term 12,668 12,128
Other assets 9,080   3,043  
Total assets $ 712,014   $ 684,180  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,406 $ 6,283
Accrued payroll and other compensation 17,688 23,744
Accrued expenses and other 18,951 15,469
Deferred revenue 76,466   75,582  
Total current liabilities 114,511   121,078  
Noncurrent liabilities:
1.00% convertible senior notes, net 256,350 249,487
Deferred revenue, less current portion 2,820 2,993
Deferred tax liabilities 444 414
Other long-term liabilities 23,238   26,052  
Total noncurrent liabilities 282,852   278,946  
Total liabilities 397,363   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; 60,970 and 59,455 shares issued; 57,399 and 56,311 shares outstanding, respectively 610 594
Additional paid-in capital 395,817 364,973
Treasury stock, 3,571 and 3,144 shares, respectively (112,430 ) (100,806 )
Accumulated other comprehensive loss (2,930 ) (3,404 )
Retained earnings 33,584   22,799  
Total stockholders' equity 314,651   284,156  
Total liabilities and stockholders' equity $ 712,014   $ 684,180  
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
 
    Six Months Ended June 30,
2016     2015
Cash flows from operating activities
Net income $ 10,785 $ 1,670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6,983 5,190
Stock-based compensation 20,697 25,806
Amortization of discounts or premiums on marketable securities 1,700 2,502
Deferred income taxes (1,164 ) (5,846 )
Amortization of debt issuance costs 639 639
Amortization of debt discount 6,224 5,862
Excess tax benefit associated with equity awards (5,048 ) (3,712 )
Provision for doubtful accounts 508 550
Loss on fixed asset disposal 4
Changes in operating assets and liabilities:
Accounts receivable (7,729 ) (33,894 )
Prepaid commission expense (2,931 ) (123 )
Prepaid expenses and other current assets 3,040 (3,303 )
Other assets (3,583 ) 1,497
Accounts payable (1,932 ) (702 )
Accrued payroll and other compensation (4,302 ) 196
Accrued expenses and other 7,715 4,439
Deferred revenue 9,206 27,085
Other long-term liabilities (2,814 ) 889  
Net cash provided by operating activities 37,998   28,745  
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (13,425 ) (5,925 )
Purchase of available-for-sale securities (144,136 ) (140,856 )
Proceeds from sale of available-for-sale securities 154,784 126,632
Acquisition of business, net of cash acquired (17,142 )
Net decrease (increase) in restricted cash 81   (464 )
Net cash used in investing activities (19,838 ) (20,613 )
Cash flows from financing activities
Proceeds from exercise of stock options 1,691 5,199
Proceeds from employee stock purchase plan 3,385 2,960
Excess tax benefit associated with equity awards 5,048 3,712
Repayment of obligations under capital leases (17 )
Acquisition of treasury stock (13,797 ) (16,154 )
Repayment of notes payable (100 )  
Net cash used in financing activities (3,773 ) (4,300 )
Effect of exchange rate changes on cash and cash equivalents 397   17  
Net increase in cash and cash equivalents 14,784 3,849
Cash and cash equivalents - beginning of period 49,562   39,517  
Cash and cash equivalents - end of period $ 64,346   $ 43,366  
 

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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