Medidata Solutions, Inc.
10/25/16

Medidata Reports Record Third 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 third quarter of 2016.

"We had a great third quarter, as execution drove our strong financial performance, improved platform adoption and broad-based momentum across our products, regions and channels," said Tarek Sherif, Medidata's chairman and chief executive officer. "Our results show that our investments in innovation and commitment to customer and partner success are paying off. With the life sciences industry increasingly turning to Medidata to help support its transformation, we are positioned to be the architecture supporting drug development today and in the future. For the remainder of the year, we're focused on executing on our 2016 plan and building the foundation for a strong 2017."

Third Quarter 2016 Results

Additional Highlights

"Building on our strong first half of 2016, third quarter and year-to-date results reflect continued solid execution and growth across all segments of our business," said Rouven Bergmann, Medidata's chief financial officer. "Our strategy is working as we continue to drive greater product adoption from new customer acquisitions as well as add-on product sales to existing customers. With 98% coverage of the midpoint of our full-year total revenue guidance, we enter the fourth quarter with strong visibility and confidence in delivering upon our 2016 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 Tuesday, November 8, 2016, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 91173550. 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 reinventing global drug development by creating the industry's leading cloud-based solutions for clinical research. Through our advanced applications and intelligent data analytics, Medidata helps advance the scientific goals of life sciences customers worldwide, including more than 700 global pharmaceutical companies, innovative biotech, diagnostic and device firms, leading academic medical centers and contract research organizations.

The Medidata Clinical Cloud® brings a new level of quality and efficiency to clinical trials that empower our customers to make more informed decisions earlier and faster. Our unparalleled clinical trial data assets provide deep insights that pave the way for future growth. The Medidata Clinical Cloud is the primary technology solution powering clinical trials for 17 of the world's top 25 global pharmaceutical companies, 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.

(3) Calculated billings is equal to revenue plus the change in deferred revenue during the period.

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
 
      Three Months Ended September 30,   Nine Months Ended September 30,
2016   2015   2016   2015
Revenues
Subscription $ 101,560 $ 88,878 $ 288,288 $ 251,556
Professional services 18,501   14,235   50,621   42,081  
Total revenues 120,061 103,113 338,909 293,637
Cost of revenues (1)(2)
Subscription 16,095 12,489 46,024 36,316
Professional services 13,133   10,304   36,929   31,564  
Total cost of revenues 29,228 22,793 82,953 67,880
Gross profit 90,833 80,320 255,956 225,757
Operating costs and expenses
Research and development (1) 28,028 24,192 84,523 68,622
Sales and marketing (1)(2) 27,789 25,881 80,856 75,923
General and administrative (1) 20,089   19,143   57,866   61,655  
Total operating costs and expenses 75,906   69,216   223,245   206,200  
Operating income 14,927 11,104 32,711 19,557
Interest and other income (expense)
Interest expense (4,220 ) (4,038 ) (12,530 ) (11,993 )
Interest income 1,005 739 2,809 1,885
Other (expense) income, net (7 ) 3   (8 ) (65 )
Total interest and other expense, net (3,222 ) (3,296 ) (9,729 ) (10,173 )
Income before income taxes 11,705 7,808 22,982 9,384
Provision for income taxes 4,347   3,127   4,839   3,033  
Net income $ 7,358   $ 4,681   $ 18,143   $ 6,351  
Earnings per share
Basic $ 0.13   $ 0.09   $ 0.33   $ 0.12  
Diluted $ 0.13   $ 0.08   $ 0.32   $ 0.11  
Weighted average common shares outstanding
Basic 55,670 53,933 55,395 53,615
Diluted 57,738 56,687 57,272 55,985
 
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 1,154 $ 1,246 $ 3,603 $ 3,805
Research and development 2,292 2,105 6,809 5,904
Sales and marketing 1,633 2,343 5,349 7,170
General and administrative 5,379   6,408   15,394   21,029  
Total stock-based compensation $ 10,458   $ 12,102   $ 31,155   $ 37,908  
 
(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 314 $ 79 $ 707 $ 438
Sales and marketing 84   30   193   89  
Total amortization of intangible assets $ 398   $ 109   $ 900   $ 527  
 

 
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 September 30,   Nine Months Ended September 30,
2016   2015   2016   2015
Operating income:
GAAP operating income $ 14,927 $ 11,104 $ 32,711 $ 19,557
GAAP operating margins 12.4 % 10.8 % 9.7 % 6.7 %
Stock-based compensation 10,458 12,102 31,155 37,908
Depreciation and amortization 3,918   2,751   10,901   7,941  
Non-GAAP operating income $ 29,303   $ 25,957   $ 74,767   $ 65,406  
Non-GAAP operating margins 24.4 % 25.2 % 22.1 % 22.3 %
Net income:
GAAP net income $ 7,358 $ 4,681 $ 18,143 $ 6,351
Stock-based compensation 10,458 12,102 31,155 37,908
Amortization 398 109 900 527
Non-cash interest expense on convertible senior notes (1) 3,501 3,316 10,364 9,817
Tax impact on add-back items (2) (5,743 ) (6,211 ) (16,968 ) (19,301 )
Adjusted non-GAAP net income $ 15,972   $ 13,997   $ 43,594   $ 35,302  
GAAP basic earnings per share $ 0.13   $ 0.09   $ 0.33   $ 0.12  
GAAP diluted earnings per share $ 0.13   $ 0.08   $ 0.32   $ 0.11  
Adjusted Non-GAAP basic earnings per share $ 0.29   $ 0.26   $ 0.79   $ 0.66  
Adjusted Non-GAAP diluted earnings per share $ 0.28   $ 0.25   $ 0.76   $ 0.63  
 
(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 nine months ended September 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)
 
      September 30,
2016
 

December 31,
2015

ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 65,165 $ 49,562
Marketable securities 264,903 220,126
Accounts receivable, net of allowance for doubtful accounts of $2,064 and $1,992, respectively 114,886 90,590
Prepaid commission expense 2,830 1,670
Prepaid expenses and other current assets 22,301 21,165
Deferred income taxes 104   88  
Total current assets 470,189 383,201
Restricted cash 5,759 5,755
Furniture, fixtures and equipment, net 54,296 51,043
Marketable securities, long-term 154,161 209,041
Goodwill 30,232 18,797
Intangible assets, net 5,489 1,172
Deferred income taxes, long-term 50,668 12,128
Other assets 14,972   3,043  
Total assets $ 785,766   $ 684,180  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,185 $ 6,283
Accrued payroll and other compensation 24,740 23,744
Accrued expenses and other 20,394 15,469
Deferred revenue 77,252   75,582  
Total current liabilities 123,571   121,078  
Noncurrent liabilities:
1.00% convertible senior notes, net 259,851 249,487
Deferred revenue, less current portion 3,312 2,993
Deferred tax liabilities 446 414
Other long-term liabilities 19,475   26,052  
Total noncurrent liabilities 283,084   278,946  
Total liabilities 406,655   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; 61,214 and 59,455
shares issued; 57,599 and 56,311 shares outstanding, respectively

612 594
Additional paid-in capital 403,765 364,973
Treasury stock, 3,615 and 3,144 shares, respectively (113,070 ) (100,806 )
Accumulated other comprehensive loss (3,715 ) (3,404 )
Retained earnings 91,519   22,799  
Total stockholders' equity 379,111   284,156  
Total liabilities and stockholders' equity $ 785,766   $ 684,180  
 

MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
 
      Nine Months Ended September 30,
2016   2015
Cash flows from operating activities
Net income $ 18,143 $ 6,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,901 7,941
Stock-based compensation 31,155 37,908
Amortization of discounts or premiums on marketable securities 2,268 3,667
Deferred income taxes 3,768 (1,235 )
Amortization of debt issuance costs 959 958
Amortization of debt discount 9,405 8,859
Provision for doubtful accounts 863 539
Loss on fixed asset disposal 15
Changes in operating assets and liabilities:
Accounts receivable (32,414 ) (32,284 )
Prepaid commission expense (3,096 ) 374
Prepaid expenses and other current assets (1,747 ) (5,268 )
Other assets (5,443 ) 1,814
Accounts payable (1,883 ) (1,235 )
Accrued payroll and other compensation 863 3,376
Accrued expenses and other 10,525 1,644
Deferred revenue 10,661 22,842
Other long-term liabilities (6,577 ) 1,902  
Net cash provided by operating activities 48,366   58,153   (1)
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (15,872 ) (11,017 )
Purchase of available-for-sale securities (214,670 ) (207,126 )
Proceeds from sale of available-for-sale securities 223,664 190,656
Purchase of cost method investment (4,000 )
Acquisition of business, net of cash acquired (17,186 )
Net decrease (increase) in restricted cash 80   (464 )
Net cash used in investing activities (27,984 ) (27,951 )
Cash flows from financing activities
Proceeds from exercise of stock options 4,269 5,770
Proceeds from employee stock purchase plan 5,190 4,675
Repayment of obligations under capital leases (26 )
Acquisition of treasury stock (14,437 ) (16,915 )
Repayment of notes payable (100 ) (32 )
Net cash used in financing activities (5,078 ) (6,528 ) (1)
Effect of exchange rate changes on cash and cash equivalents 299   (12 )
Net increase in cash and cash equivalents 15,603 23,662
Cash and cash equivalents - beginning of period 49,562   39,517  
Cash and cash equivalents - end of period $ 65,165   $ 63,179  

 

(1) As a result of the Company's early adoption of ASU No. 2016-09, which requires excess tax benefit on equity awards to be presented as an operating activity, the consolidated statement of cash flows for the nine months ended September 30, 2015 has been adjusted to reflect an offsetting increase of $1,706 thousand to net cash provided by operating activities and net cash used in financing activities.

Investor:
Medidata Solutions
Anthony D'Amico, 732-767-4331
adamico@mdsol.com
or
Media:
Medidata Solutions
Nicole Pariser, 212-659-1069
npariser@mdsol.com

Source: Medidata

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