Medidata Solutions, Inc.
04/26/17

Medidata Reports Record First Quarter 2017 Results

NEW YORK--(BUSINESS WIRE)-- Medidata (NASDAQ:MDSO), the leading global provider of cloud-based technology and data analytics for clinical research, today announced its financial results for the first quarter of 2017.

"We had a record start to the year financially and operationally, as adoption of Medidata's platform and services continue to accelerate," said Tarek Sherif, Medidata's chairman and chief executive officer. "Business results and ROI matter when developing drugs, and that's driving our consistently strong sales. The Medidata Clinical Cloud® is the industry's most intelligent, integrated cloud-based platform, powered by unmatched data analytics capabilities—helping drive accelerated trials, lower costs and better connectivity to our most important audience, the patient."

First Quarter 2017 Results

Additional Highlights

"First quarter performance was strong, highlighted by 22% total revenue growth, over $22 million of operating cash flow, 200 bps of EBITDAO margin expansion, and 32% billings growth," said Rouven Bergmann, Medidata's chief financial officer. "As evident in our financial results, customers are adopting our platform at an accelerated rate to transform clinical development with data analytics as the new catalyst driving buying decisions."

Financial Outlook

For the full-year 2017, the Company's guidance provided on February 9, 2017 remains unchanged:

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, May 10, 2017 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 1623403. 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 and medical device 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 over 850 global pharmaceutical companies, 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 and is used by 16 of the top 20 medical device developers—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; integration activities, performance and financial impact of acquired companies; 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, 2016. 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-effected 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 valued at an amount equal to the contracts to be renewed.

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
 
      Three Months Ended March 31,
2017     2016
Revenues
Subscription $ 107,070 $ 89,968
Professional services 19,751   14,270  
Total revenues 126,821 104,238
Cost of revenues (1)(2)
Subscription 17,129 14,329
Professional services 13,485   10,339  
Total cost of revenues 30,614 24,668
Gross profit 96,207 79,570
Operating costs and expenses
Research and development (1) 29,937 28,228
Sales and marketing (1)(2) 30,109 25,458
General and administrative (1) 23,988   19,246  
Total operating costs and expenses 84,034   72,932  
Operating income 12,173 6,638
Interest and other income (expense)
Interest expense (4,327 ) (4,127 )
Interest income 1,171 872
Other expense, net   (4 )
Total interest and other expense, net (3,156 ) (3,259 )
Income before income taxes 9,017 3,379
Provision for income taxes (501 ) (1,196 ) (3)
Net income $ 9,518   $ 4,575   (3)
Earnings per share
Basic $ 0.17   $ 0.08   (3)
Diluted $ 0.16   $ 0.08   (3)
Weighted average common shares outstanding
Basic 56,072 55,119
Diluted 58,083 56,589
 
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 1,169 $ 1,210
Research and development 2,835 2,194
Sales and marketing 1,175 1,877
General and administrative 5,142   4,969  
Total stock-based compensation $ 10,321   $ 10,250  
 
(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 454 $ 79
Sales and marketing 83   24  
Total amortization of intangible assets $ 537   $ 103  
 
(3) Figures for the three months ended March 31, 2016 have been recast to reflect our early adoption of Accounting Standards Update (ASU) No. 2016-09, Improvements to Share-Based Payment Accounting, consistent with the quarterly information presented in our Annual Report on Form 10-K for the year ended December 31, 2016.
 

 

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,
  2017     2016
Operating income:
GAAP operating income $ 12,173 $ 6,638
GAAP operating margins 9.6 % 6.4 %
Stock-based compensation 10,321 10,250
Depreciation and amortization 4,476   3,217  
Non-GAAP operating income $ 26,970   $ 20,105  
Non-GAAP operating margins 21.3 % 19.3 %
Net income:
GAAP net income $ 9,518 $ 4,575 (3)
Stock-based compensation 10,321 10,250
Amortization 537 103
Non-cash interest expense on convertible senior notes (1) 3,598 3,408
Tax impact on add-back items (2) (5,782 ) (5,504 )
Adjusted non-GAAP net income $ 18,192   $ 12,832   (3)
GAAP basic earnings per share $ 0.17   $ 0.08   (3)
GAAP diluted earnings per share $ 0.16   $ 0.08   (3)
Adjusted Non-GAAP basic earnings per share $ 0.32   $ 0.23   (3)
Adjusted Non-GAAP diluted earnings per share $ 0.31   $ 0.23   (3)
 
(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.
 
(3) Figures for the three months ended March 31, 2016 have been recast to reflect our early adoption of ASU No. 2016-09, Improvements to Share-Based Payment Accounting, consistent with the quarterly information presented in our Annual Report on Form 10-K for the year ended December 31, 2016.
 
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, 2017 and 2016. 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 (Unaudited)
(Amounts in thousands, except per share data)
     

March 31,
2017

   

December 31,
2016

ASSETS
Current assets:
Cash and cash equivalents $   90,422 $ 93,519
Marketable securities 274,602 281,285
Accounts receivable, net of allowance for doubtful accounts of $1,650 and $1,041, respectively 102,491 115,216
Prepaid commission expense 2,550 1,842
Prepaid expenses and other current assets 24,472 20,382
Deferred income taxes   6,536  
Total current assets 494,537 518,780
Restricted cash 5,511 5,760
Furniture, fixtures and equipment, net 63,284 58,461
Marketable securities, long-term 148,359 140,418
Goodwill 39,075 30,780
Intangible assets, net 13,036 5,090
Deferred income taxes, long-term 43,276 40,415
Other assets 20,350   18,181  
Total assets $   827,428   $ 817,885  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,699 $ 6,202
Accrued payroll and other compensation 16,034 29,260
Accrued expenses and other 23,829 20,958
Deferred revenue 80,122   75,911  
Total current liabilities 126,684   132,331  
Noncurrent liabilities:
1.00% convertible senior notes, net 266,999 263,401
Deferred revenue, less current portion 1,607 1,703
Deferred tax liabilities 124 322
Other long-term liabilities 20,642   18,138  
Total noncurrent liabilities 289,372   283,564  
Total liabilities 416,056   415,895  
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; 62,246 and 61,393 shares issued; 58,254 and 57,733 shares outstanding, respectively 622 614
Additional paid-in capital 431,479 418,497
Treasury stock, 3,992 and 3,660 shares, respectively (127,822 ) (114,204 )
Accumulated other comprehensive loss (4,784 ) (5,276 )
Retained earnings 111,877   102,359  
Total stockholders' equity 411,372   401,990  
Total liabilities and stockholders' equity $   827,428   $ 817,885  
 

 
MEDIDATA SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
 
      Three Months Ended March 31,
2017     2016
Cash flows from operating activities
Net income $ 9,518 $ 4,575 (1)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,476 3,217
Stock-based compensation 10,321 10,250
Amortization of discounts or premiums on marketable securities 413 983
Deferred income taxes 1,355 1,187 (1)
Amortization of debt issuance costs 319 319
Amortization of debt discount 3,279 3,089
Provision for doubtful accounts 680 371
(Gain) loss on fixed asset disposal (2 ) 4
Changes in operating assets and liabilities:
Accounts receivable 12,045 4,635
Prepaid commission expense (1,843 ) (2,738 )
Prepaid expenses and other current assets (6,791 ) 1,199
Other assets 1,712 (2,590 )
Accounts payable 130 (1,297 )
Accrued payroll and other compensation (15,557 ) (10,052 )
Accrued expenses and other (2,397 ) 238
Deferred revenue 4,090 3,134
Other long-term liabilities 737   (2,720 )
Net cash provided by operating activities 22,485   13,804   (1)
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (6,790 ) (7,589 )
Purchase of available-for-sale securities (81,985 ) (28,815 )
Proceeds from sale of available-for-sale securities 80,426 69,352
Acquisition of business, net of cash acquired (8,702 )  
Net cash (used in) provided by investing activities (17,051 ) 32,948  
Cash flows from financing activities
Proceeds from exercise of stock options 2,597 194
Proceeds from employee stock purchase plan 2,090 1,819
Acquisition of treasury stock (13,617 ) (10,831 )
Net cash used in financing activities (8,930 ) (8,818 ) (1)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 150   173  
Net (decrease) increase in cash, cash equivalents and restricted cash (3,346 ) 38,107
Cash, cash equivalents and restricted cash - Beginning of period 99,279   55,472  
Cash, cash equivalents and restricted cash - End of period $ 95,933   $ 93,579  

 

(1) The consolidated statement of cash flows for the three months ended March 31, 2016 has been adjusted to reflect the Company's early adoption of ASU No. 2016-09 during the third quarter of 2016, resulting in an offsetting increase of $1,341 thousand to net cash provided by operating activities and net cash used in financing activities.
 

Investors:
Medidata Solutions
Anthony D'Amico, 732-767-4331
adamico@mdsol.com
or
Media:
Medidata Solutions
Dick Wolfe, 646-483-2988
dwolfe@mdsol.com

Source: Medidata

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