Medidata Solutions Reports Third Quarter 2012 Results

  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
halpay@mdsol.com
or
Media Contact:
Lineene Krasnow, 212-918-1761
lkrasnow@mdsol.com