Medidata Solutions Reports Third Quarter 2012 Results *Year to date bookings grew 100% year over year *Record total revenues of $55.8 million, increased 21% year over year *GAAP operating income of $6.8 million, increased 20% sequentially *Raises full year revenue guidance to between $217.7 and $219.7 million Business Wire NEW YORK -- October 31, 2012 Medidata Solutions (NASDAQ: MDSO), a leading global provider of cloud-based drug development solutions that optimize the efficiency of clinical development, today announced its financial results for the third quarter of 2012, and provided detailed financial guidance for the fourth quarter and full year 2012. “Medidata’s sales execution, healthy top-line growth and robust fourth quarter pipeline are proof that the aggressive investment strategy we initiated earlier this year, focused on expanding our product footprint and our sales coverage and capabilities, is paying off,” said Tarek Sherif, Medidata’s chief executive officer. “This quarter, we signed significant commitments with several top 25 life sciences companies, including Sanofi and Otsuka Pharmaceutical. In combination with accelerating multi-product adoption by new and existing customers, it is clear that life sciences companies are increasingly relying on the Medidata Clinical Cloud to achieve improved productivity and competitive advantage in their clinical development efforts.” Third Quarter and Year to Date Highlights *Bookings in the quarter were the second highest in the company’s history, with year to date activity ahead of the entire full year of 2011 by 34%, exceeding internal expectations. *Record revenues for the quarter of $55.8 million increased 21% year over year, exceeding the company’s long-term revenue growth target of 20%. *For the quarter, non-Rave revenues increased 142% year over year and 27% sequentially. Year to date, non-Rave revenues grew 145% year over year. *Total customers were up 28% over last year, to a record 333, a net increase of 72 customers year over year. Six current customers upgraded to enterprise deals from study-by-study arrangements in the quarter, highlighting the increasing adoption of the Medidata platform. These new enterprise customers include Sanofi, one of the world’s leading pharmaceutical companies; Otsuka Pharmaceutical, one of Japan’s top 10 pharmas; and a Top 5 contract research organization. *Current customers contracting for additional products grew by 50% over last quarter, showing continued growth in the Medidata Clinical Cloud platform. Customers with multiple products now account for over 35% of the total customer base. Mr. Sherif continued, “We have been investing to extend our cloud-based platform, expand our addressable market from $2 billion around the time of our IPO to $6 billion today and drive our continued momentum. Given the fundamentals in our industry, our proven ability to execute and accelerating customer commitments, and despite a challenging economic environment, Medidata is well positioned for strong revenue growth in the fourth quarter and in 2013.” Financial Highlights Revenues for the third quarter of 2012 increased 21% to a record $55.8 million, compared with $46.3 million in the third quarter of 2011. Application services revenues for the third quarter of 2012 increased 22% year over year and 6% sequentially to $44.0 million. Gross margins in the third quarter of 2012 were 72%, an increase of one percentage point over gross margins of 71% a year ago. Operating expenses in the third quarter increased 3% sequentially to $33.1 million and 31% compared to the third quarter last year, primarily due to growth related initiatives. These include increased staffing-related costs in R&D, higher sales compensation and sales-related expense, and certain charges in G&A related to higher professional fees and miscellaneous charges. GAAP operating income for the third quarter of 2012 increased 20% sequentially to $6.8 million, compared with $5.7 million in the second quarter. Non-GAAP operating income* for the quarter increased 7% sequentially to $11.8 million, compared with $11.0 million in the second quarter. GAAP net income for the third quarter of 2012 increased 12% sequentially to $4.1 million, or $0.16 per diluted share, compared with $3.6 million, or $0.14 per diluted share, in the second quarter. Non-GAAP net income* for the third quarter of 2012 increased 2% sequentially to $7.5 million, or $0.29 per diluted share, compared with $7.3 million, or $0.29 per diluted share, in the second quarter. Adjusted non-GAAP net income* for the third quarter of 2012 increased 5% sequentially to $6.1 million, or $0.24 per diluted share, compared with $5.8 million, or $0.23 per diluted share, in the second quarter. Total cash, cash equivalents and marketable securities were $123.6 million at the end of the third quarter, an increase of $15.9 million from the beginning of 2012. Year to date, the company generated cash flow from operations of $16.7 million, including $8.5 million in the third quarter. Financial Outlook For the full year 2012, the company expects: *Revenues between $217.7 and $219.7 million. *Professional services revenues in the high $40 million range. *Non-GAAP operating income between $45.6 and $47.1 million. Based on current estimates, this would equate to GAAP operating income between $26.1 and $27.6 million. *Non-GAAP net income between $28.7 and $30.2 million. Based on current estimates, this would equate to GAAP net income between $15.4 and $16.9 million. *Adjusted non-GAAP net income, which includes the tax effected impact from stock-based compensation and amortization at a 40% effective tax rate, between $23.3 and $24.8 million. *While changes in the stock price could change the fully diluted share count, the company is assuming 25.4 million fully diluted shares. Application services backlog for the remainder of the year, as of September 30, 2012, was $44 million, an increase of 31% over the comparable period a year ago. This compares with a 5% increase in remaining application services backlog as of September 30, 2011 over the comparable period in 2010. The difference between the application services backlog and the balance of revenue guidance for the remainder of the year includes professional services revenue guidance and expected additional business from new and existing customers. For the fourth quarter of 2012, the company expects: *Revenues between $58.0 and $60.0 million. *Non-GAAP operating income between $12.5 and $14.0 million. Based on current estimates this would equate to GAAP operating income between $7.5 and $9.0 million. *Non-GAAP net income between $7.5 and $9.0 million. Based on current estimates, this would equate to GAAP net income between $4.0 and $5.5 million. *Adjusted non-GAAP net income, which includes the tax effected impact from stock-based compensation and amortization at a 40% effective tax rate, between $6.0 and $7.5 million. *While changes in the stock price could change the fully diluted share count, the company is assuming 25.8 million fully diluted shares. “During the quarter we hired ahead of plan in R&D and incurred higher sales compensation expense due to our sales organization's outperformance.Our revenue growth in excess of our long-term growth target for the remainder of the year clearly supports our investment strategy. We now expect 23-27% year over year top line growth in the fourth quarter,” said Cory Douglas, Medidata’s chief financial officer. Conference Call The company plans to host its investor conference call today at 8:00 a.m. Eastern. 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, November 14, 2012 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 40140106. An archive of the call will also be hosted on the “Investor” section of Medidata’s web site, http://investor.mdsol.com, for a limited period of time. About Medidata Solutions Worldwide Medidata Solutions is a leading global provider of cloud-based clinical development solutions that enhance the efficiency of customers’ clinical trials. Medidata’s advanced solutions lower the total cost of clinical development by optimizing clinical trials from concept to conclusion: from study and protocol design, trial planning and budgeting, site negotiation, clinical portal, trial management, randomization and trial supply management, clinical data capture and management, safety events capture, medical coding to business analytics. Our diverse life science customer base spans biopharmaceutical companies, medical device and diagnostic companies, academic and government institutions, CROs and other research organizations, and includes more than 20 of the top 25 global pharmaceutical companies as well as organizations of all sizes developing life-enhancing medical treatments and diagnostics. 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, 2011. 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. *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 adjustment to the fair value of contingent consideration. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration. Adjusted non-GAAP net income excludes the impact of tax affected amortization of intangible assets associated with acquisitions, stock-based compensation expense and adjustment to the fair value of contingent consideration. 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 and amortization and non-cash, share-based compensation charges and management believes, based on discussions with investors, that these Non-GAAP measures enhance investor’s ability to assess Medidata’s historical and project 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. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Revenues Application $ 43,973 $ 35,940 $ 123,910 $ 108,372 services Professional 11,872 10,365 35,807 28,892 services Total revenues 55,845 46,305 159,717 137,264 Cost of revenues (1)(2) Application 8,402 7,279 24,099 21,471 services Professional 7,497 6,224 22,190 18,476 services Total cost of 15,899 13,503 46,289 39,947 revenues Gross profit 39,946 32,802 113,428 97,317 Operating costs and expenses: Research and 11,239 7,306 31,822 21,511 development(1) Sales and marketing 12,147 8,788 34,793 26,519 (1)(2) General and administrative 9,721 9,140 28,170 27,522 (1) Total operating costs and 33,107 25,234 94,785 75,552 expenses Operating 6,839 7,568 18,643 21,765 income Interest and other (expense) income: Interest (71 ) (30 ) (120 ) (97 ) expense Interest income 65 64 196 227 Other (expense) (7 ) 244 (17 ) 242 income, net Total interest and other (13 ) 278 59 372 (expense) income, net Income before 6,826 7,846 18,702 22,137 income taxes Provision for 2,773 364 7,275 1,472 income taxes Net income $ 4,053 $ 7,482 $ 11,427 $ 20,665 Earnings per share: Basic $ 0.16 $ 0.32 $ 0.47 $ 0.88 Diluted $ 0.16 $ 0.31 $ 0.45 $ 0.84 Weighted average common shares outstanding: Basic 24,773 23,752 24,400 23,579 Diluted 25,682 24,491 25,292 24,683 (1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows: Cost of $ 483 $ 361 $ 1,292 $ 922 revenues Research and 289 226 787 523 development Sales and 761 553 2,128 1,464 marketing General and 1,318 1,297 3,956 3,564 administrative Total stock-based $ 2,851 $ 2,437 $ 8,163 $ 6,473 compensation (2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows: Cost of $ 318 $ 318 $ 955 $ 770 revenues Sales and 129 126 387 374 marketing Total amortization of $ 447 $ 444 $ 1,342 $ 1,144 intangible assets MEDIDATA SOLUTIONS, INC. Reconciliation of GAAP Operating Income and GAAP Net Income to Non-GAAP Operating Income, Non-GAAP Net Income, and Adjusted Non-GAAP Net Income(Unaudited) (Amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Operating income: GAAP operating $ 6,839 $ 7,568 $ 18,643 $ 21,765 income GAAP operating 12.3 % 16.4 % 11.7 % 15.8 % margins Stock-based 2,851 2,437 8,163 6,473 compensation Depreciation and 1,969 1,940 5,997 5,902 amortization Contingent consideration 117 - 277 - adjustment (1) Non-GAAP operating $ 11,776 $ 11,945 $ 33,080 $ 34,140 income Non-GAAP operating 21.1 % 25.8 % 20.7 % 24.9 % margins Net income: GAAP net $ 4,053 $ 7,482 $ 11,427 $ 20,665 income Stock-based 2,851 2,437 8,163 6,473 compensation Amortization 447 444 1,342 1,144 Contingent consideration 117 - 277 - adjustment (1) Non-GAAP net 7,468 10,363 21,209 28,282 income Tax impact on add-back items (1,366 ) - (3,913 ) - (2) Adjusted non-GAAP net $ 6,102 $ 10,363 $ 17,296 $ 28,282 income GAAP basic earnings per $ 0.16 $ 0.32 $ 0.47 $ 0.88 share GAAP diluted earnings per $ 0.16 $ 0.31 $ 0.45 $ 0.84 share Non-GAAP basic earnings per $ 0.30 $ 0.44 $ 0.87 $ 1.20 share Non-GAAP diluted $ 0.29 $ 0.42 $ 0.84 $ 1.15 earnings per share Adjusted Non-GAAP basic $ 0.25 $ 0.44 $ 0.71 $ 1.20 earnings per share Adjusted Non-GAAP diluted $ 0.24 $ 0.42 $ 0.68 $ 1.15 earnings per share (1) Amount represents the effect of changes in fair value of contingent consideration liability. (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, 2012 and 2011. Non-GAAP operating income excludes the impact of depreciation, amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration. Adjusted non-GAAP net income excludes the impact of tax affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, and adjustment to the fair value of contingent consideration. MEDIDATA SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except per share data) September 30, 2012 December 31, 2012 ASSETS Current assets: Cash and cash equivalents $ 37,404 $ 45,214 Marketable securities 86,230 62,463 Accounts receivable, net of allowance for doubtful accounts of 31,627 22,970 $688 and $882, respectively Prepaid commission expense 2,032 1,743 Prepaid expenses and other current 7,853 4,380 assets Deferred income taxes 5,401 10,896 Total current assets 170,547 147,666 Restricted cash 388 388 Furniture, fixtures and equipment, 9,233 9,825 net Goodwill 15,386 15,164 Intangible assets, net 2,159 3,425 Deferred income taxes, long-term 11,563 11,581 Other assets 2,929 1,786 Total assets $ 212,205 $ 189,835 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,640 $ 3,861 Accrued payroll and other 10,833 9,854 compensation Accrued expenses and other 5,806 5,886 Deferred revenue 49,926 51,225 Capital lease obligations 57 114 Total current liabilities 70,262 70,940 Noncurrent liabilities: Deferred revenue, less current 11,488 12,037 portion Deferred tax liabilities 627 629 Capital lease obligations, less 114 136 current portion Other long-term liabilities 1,004 1,976 Total noncurrent liabilities 13,233 14,778 Total liabilities 83,495 85,718 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; 100,000 shares authorized, 26,247 and 25,053 shares 262 250 issued; 25,890 and 24,888 shares outstanding, respectively Additional paid-in capital 153,639 137,556 Treasury stock, 357 and 165 shares, (5,626 ) (2,186 ) respectively Accumulated other comprehensive 149 (362 ) income (loss) Accumulated deficit (19,714 ) (31,141 ) Total stockholders' equity 128,710 104,117 Total liabilities and stockholders' $ 212,205 $ 189,835 equity MEDIDATA SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands) Nine Months Ended September 30, 2012 2011 Cash flows from operating activities: Net income $ 11,427 $ 20,665 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,997 5,902 Stock-based compensation 8,163 6,473 Amortization of discounts or premiums on 1,032 944 marketable securities Deferred income taxes 5,493 (113 ) Amortization of debt issuance costs 45 45 Excess tax benefit associated with equity (957 ) - awards Contingent consideration adjustment 277 - Changes in operating assets and liabilities: Accounts receivable (5,689 ) 14,949 Prepaid commission expense (841 ) 785 Prepaid expenses and other current assets (2,538 ) 318 Other assets (1,525 ) (509 ) Accounts payable (646 ) (251 ) Accrued payroll and other compensation 979 (2,920 ) Accrued expenses and other 388 (26 ) Deferred revenue (4,652 ) (19,963 ) Other long-term liabilities (251 ) (43 ) Net cash provided by operating activities 16,702 26,256 Cash flows from investing activities: Purchase of furniture, fixtures and (3,923 ) (2,896 ) equipment Purchase of available-for-sale marketable (84,758 ) (93,918 ) securities Proceeds from sale of available-for-sale 60,007 85,712 marketable securities Acquisition of business, net of cash - (5,166 ) acquired Decrease in restricted cash - 144 Net cash used in investing activities (28,674 ) (16,124 ) Cash flows from financing activities: Proceeds from exercise of stock options 6,975 2,202 Excess tax benefit associated with equity 957 - awards Payment of acquisition-related earn-out (251 ) - Repayment of obligations under capital (105 ) (605 ) leases Acquisition of treasury stock (3,440 ) (1,712 ) Net cash provided by (used in) financing 4,136 (115 ) activities Net (decrease) increase in cash and cash (7,836 ) 10,017 equivalents Effect of exchange rate changes on cash 26 7 and cash equivalents Cash and cash equivalents - Beginning of 45,214 16,025 period Cash and cash equivalents - End of period $ 37,404 $ 26,049 Contact: Medidata Solutions Investor Contact: Hulus Alpay, 212-419-1025 email@example.com or Media Contact: Lineene Krasnow, 212-918-1761 firstname.lastname@example.org
Medidata Solutions Reports Third Quarter 2012 Results
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