The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Business Wire

Medidata Solutions Reports Record Third Quarter 2013 Results

<ul> <li class='bwlistitemmargb'> <i>Record revenues of $70.9 million, a 27% year-over-year increase</i> </li> <li class='bwlistitemmargb'> <i>Record application services revenue of $57.9 million, a 32% year-over-year increase</i> </li> <li class='bwlistitemmargb'> <i>Raises 2013 revenue guidance to between $275.3 and $276.8 million</i> </li> </ul>

Thursday, October 24, 2013

Medidata Solutions Reports Record Third Quarter 2013 Results

06:30 EDT Thursday, October 24, 2013

NEW YORK (Business Wire) -- Medidata Solutions (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 2013 and provided detailed financial guidance.

“I am very proud of our company's strong execution in the most recent quarter and year to date, as our results came in at record levels. Current and new customers are increasingly choosing to work on the Medidata Clinical Cloud™ to drive innovation and improve productivity in their clinical development efforts,” said Tarek Sherif, Medidata's chairman and chief executive officer. “Our number one priority is to drive value for our clients as they work to bring new life-enhancing and innovative drugs to market. While our financial results and operational metrics tell a great story, underlying them is an evolving opportunity that holds tremendous potential for our future. Medidata's vertical cloud focus, innovative platform and unique data assets are embedding us in the industry's transformation and are driving a broad range of new opportunities.”

Third Quarter 2013 Results

  • Total revenues for the third quarter of 2013 were $70.9 million, an increase of $15.1 million, or 27%, compared with $55.8 million in 2012. Application services revenue was $57.9 million, an increase of 32% compared with the same period last year.
  • GAAP operating income for the quarter increased to $9.5 million, up 39%, compared with $6.8 million a year ago. Non-GAAP operating income* for the third quarter of 2013 increased to $18.2 million, up 55%, compared with $11.8 million a year ago.
  • Medidata completed an offering of $287.5 million aggregate principal amount of 1.00% convertible senior notes due in 2018.
  • GAAP net income for the third quarter of 2013 was $5.3 million, or $0.20 per diluted share, up 30%, compared with $4.1 million, or $0.16 per diluted share, in the third quarter of 2012. GAAP net income for the third quarter of 2013 includes cash and non-cash interest expenses associated with the convertible senior notes issued during the quarter. Adjusted non-GAAP net income* for the third quarter of 2013 was $10.7 million, or $0.40 per diluted share, up 75%, compared with $6.1 million, or $0.24 per diluted share, in the third quarter of 2012 and excludes the impact of the non-cash interest expense related to our convertible senior notes. See our non-GAAP reconciliation included in this release for full details of our non-GAAP adjustments associated with our convertible senior notes and other items.
  • Application services backlog for the remainder of the year as of September 30, 2013, increased to $59.5 million, up 35% over the comparable period a year ago.
  • Total cash, cash equivalents and marketable securities were $428.0 million at the end of the third quarter, an increase of $304.4 million, or 246%, as compared with $123.6 million at the end of the third quarter of 2012, primarily due to net proceeds of $279.4 million from the convertible senior notes issued during the quarter.
  • Cash flow from operations was $20.4 million in the third quarter, up 140% year-over-year.

Additional Highlights

  • 47% of customers had committed to multiple products at the end of the third quarter of 2013, as compared with 36% at the end of the third quarter of 2012, reflecting increased adoption of our portfolio of solutions.
  • Medidata's customer base grew to 379 in the third quarter of 2013, up 14% from the third quarter of 2012.
  • Non-Rave revenues increased 92% year over year, driven by increased adoption of solutions, including data analytics, patient randomization and trial supply, study and protocol design, medical coding, and trial management.

“Our revenue growth, margin improvement, profitability and strong cash flows highlight the benefits of our vertically focused business model,” said Cory Douglas, Medidata's chief financial officer. “Given our strong performance year to date, solid backlog coverage, industry leading revenue retention and a healthy pipeline of future opportunities, we are once again raising our 2013 guidance.”

Financial Outlook

For the full year 2013, the company now expects:

  • Revenues between $275.3 and $276.8 million.
  • Professional services revenues in the high $40 million range.
  • Non-GAAP operating income between $66.9 and $67.9 million. Based on current estimates, this would equate to GAAP operating income between $32.4 and $33.4 million.
  • Adjusted non-GAAP net income, which includes the tax affected adjustments primarily from stock-based compensation, non-cash interest expense associated with convertible senior notes, and amortization at a 40% effective tax rate, between $37.3 and $38.3 million. Based on current estimates, this would equate to GAAP net income between $17.6 and $18.6 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.9 million fully diluted shares.

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 Thursday, November 7, 2013, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 7435697. 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

Medidata Solutions 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. The Medidata Clinical Cloud™ brings new levels of productivity and quality to the clinical testing of promising medical treatments, from study design and planning through execution, management and reporting. We are committed to advancing the competitive and scientific goals of global customers, which include over 90% of the top 25 global pharmaceutical companies; innovative biotech, diagnostic and device firms; leading academic medical centers; and contract research organizations.

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, 2012. 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 an 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, an adjustment to the fair value of contingent consideration, and non-cash interest expense on convertible senior notes. Adjusted non-GAAP net income excludes the impact of tax-affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, an adjustment to the fair value of contingent consideration, 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 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

September 30,

     

Nine Months Ended

September 30,

2013       2012 2013       2012
Revenues
Application services $ 57,946 $ 43,973 $ 164,944 $ 123,910
Professional services 13,000   11,872   37,330   35,807  
Total revenues 70,946 55,845 202,274 159,717
Cost of revenues (1)(2)
Application services 9,344 8,402 27,318 24,099
Professional services 7,918   7,497   23,993   22,190  
Total cost of revenues 17,262 15,899 51,311 46,289
Gross profit 53,684 39,946 150,963 113,428
Operating costs and expenses:
Research and development (1) 13,130 11,239 37,140 31,822
Sales and marketing (1)(2) 15,445 12,147 46,187 34,793
General and administrative (1) 15,633   9,721   42,232   28,170  
Total operating costs and expenses 44,208   33,107   125,559   94,785  
Operating income 9,476 6,839 25,404 18,643
Interest and other income (expense):
Interest expense (2,133 ) (71 ) (2,178 ) (120 )
Interest income 109 65 244 196
Other expense, net (226 ) (7 ) (82 ) (17 )
Total interest and other (expense) income, net (2,250 ) (13 ) (2,016 ) 59  
Income before income taxes 7,226 6,826 23,388 18,702
Provision for income taxes 1,953   2,773   7,309   7,275  
Net income $ 5,273   $ 4,053   $ 16,079   $ 11,427  
Earnings per share:
Basic $ 0.20   $ 0.16   $ 0.63   $ 0.47  
Diluted $ 0.20   $ 0.16   $ 0.60   $ 0.45  
Weighted average common shares outstanding:
Basic 25,724 24,773 25,425 24,400
Diluted 27,000 25,682 26,752 25,292
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues $ 665 $ 483 $ 1,990 $ 1,292
Research and development 454 289 1,539 787
Sales and marketing 1,597 761 4,541 2,128
General and administrative 4,400   1,318   11,375   3,956  
Total stock-based compensation $ 7,116   $ 2,851   $ 19,445   $ 8,163  
(2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues $ 102 $ 318 $ 484 $ 955
Sales and marketing 33   129   179   387  
Total amortization of intangible assets $ 135   $ 447   $ 663   $ 1,342  
 

 
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

September 30,

      Nine Months Ended

September 30,

2013       2012 2013       2012
Operating income:
GAAP operating income $ 9,476 $ 6,839 $ 25,404 $ 18,643
GAAP operating margins 13.4 % 12.3 % 12.6 % 11.7 %
Stock-based compensation 7,116 2,851 19,445 8,163
Depreciation and amortization 1,564 1,969 4,888 5,997
Contingent consideration adjustment (1) 60   117   180   277  
 
Non-GAAP operating income $ 18,216   $ 11,776   $ 49,917   $ 33,080  
Non-GAAP operating margins 25.7 % 21.1 % 24.7 % 20.7 %
Net income:
GAAP net income $ 5,273 $ 4,053 $ 16,079 $ 11,427
Stock-based compensation 7,116 2,851 19,445 8,163
Amortization 135 447 663 1,342
Contingent consideration adjustment (1) 60 117 180 277
Non-cash interest expense on convertible senior notes (2) 1,696     1,696    
 
Non-GAAP net income 14,280 7,468 38,063 21,209
Tax impact on add-back items (3) (3,603 ) (1,366 ) (8,794 ) (3,913 )
Adjusted non-GAAP net income $ 10,677   $ 6,102   $ 29,269   $ 17,296  
GAAP basic earnings per share $ 0.20   $ 0.16   $ 0.63   $ 0.47  
GAAP diluted earnings per share $ 0.20   $ 0.16   $ 0.60   $ 0.45  
Non-GAAP basic earnings per share $ 0.56   $ 0.30   $ 1.50   $ 0.87  
Non-GAAP diluted earnings per share $ 0.53   $ 0.29   $ 1.42   $ 0.84  
Adjusted Non-GAAP basic earnings per share $ 0.42   $ 0.25   $ 1.15   $ 0.71  
Adjusted Non-GAAP diluted earnings per share $ 0.40   $ 0.24   $ 1.09   $ 0.68  
 
 
(1)   Amount represents the effect of changes in fair value of contingent consideration liability.
 
(2) During the third quarter of 2013, we issued $287.5 million in convertible senior notes (the "Notes") with a coupon interest rate of 1.00%. Interest is paid semiannually on February 1 and August 1 over the five-year term of the notes. In connection with the Notes, we are required to recognize non-cash interest expense, including amortization of debt discount and issuance costs, in accordance with accounting guidance for convertible debt that may be settled in cash. We exclude this incremental non-cash interest expense for purposes of calculating non-GAAP net income and 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 or meaningful when comparing current results to past results.
 
(3) 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, 2013 and 2012. 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, adjustment to the fair value of contingent consideration, and non-cash interest expense on convertible senior notes. Adjusted non-GAAP net income excludes the impact of tax affected amortization of intangible assets associated with acquisitions, stock-based compensation expense, adjustment to the fair value of contingent consideration, and non-cash interest expense on convertible senior notes.

 

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except per share data)
      September 30, 2013     December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 191,645 $ 32,683
Marketable securities 166,970 89,871
Accounts receivable, net of allowance for doubtful accounts of $1,080 and $747, respectively 40,516 42,359
Prepaid commission expense 3,489 2,281
Prepaid expenses and other current assets 16,637 8,042
Deferred income taxes 3,706   7,465  
Total current assets 422,963 182,701
 
Restricted cash 4,137 388
Furniture, fixtures and equipment, net 23,759 10,474
Marketable securities, long-term 69,337
Goodwill 15,377 15,382
Intangible assets, net 1,025 1,708
Deferred income taxes, long-term 11,055
Other assets 9,777   2,923  
Total assets $ 546,375   $ 224,631  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,930 $ 2,998
Accrued payroll and other compensation 14,778 14,140
Accrued expenses and other 8,147 6,674
Deferred revenue 52,159 50,348
Capital lease obligations 56   55  
Total current liabilities 79,070   74,215  
Noncurrent liabilities:
Convertible 1.00% senior notes, net 227,006
Deferred revenue, less current portion 2,451 4,323
Deferred tax liabilities 12,401 624
Capital lease obligations, less current portion 58 100
Other long-term liabilities 9,994   3,278  
Total noncurrent liabilities 251,910   8,325  
Total liabilities 330,980   82,540  
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, 27,349 and 26,405 shares issued; 26,747 and 26,039 shares outstanding, respectively 273 264
Additional paid-in capital 228,855 160,637
Treasury stock, 602 and 366 shares, respectively (16,375 ) (5,626 )
Accumulated other comprehensive loss (316 ) (63 )
Retained earnings (accumulated deficit) 2,958   (13,121 )
Total stockholders' equity 215,395   142,091  
Total liabilities and stockholders' equity $ 546,375   $ 224,631  
 

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
  Nine Months Ended September 30,
2013   2012
Cash flows from operating activities:
Net income $ 16,079 $ 11,427
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,888 5,997
Stock-based compensation 19,445 8,163
Amortization of discounts or premiums on marketable securities 1,762 1,032
Deferred income taxes 2,954 5,493
Amortization of debt issuance costs 258 45
Amortization of debt discount 1,483
Excess tax benefit associated with equity awards (4,386 ) (957 )
Contingent consideration adjustment 180 277
Provision for doubtful accounts 657 187
Loss on fixed asset disposal 239
Changes in operating assets and liabilities:
Accounts receivable 1,640 (5,876 )
Prepaid commission expense (723 ) (841 )
Prepaid expenses and other current assets (515 ) (2,538 )
Other assets (1,933 ) (1,525 )
Accounts payable 920 (646 )
Accrued payroll and other compensation 522 979
Accrued expenses and other 4,933 388
Deferred revenue (286 ) (4,652 )
Other long-term liabilities 1,391   (251 )
 
Net cash provided by operating activities 49,508   16,702  
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (18,864 ) (3,923 )
Purchase of available-for-sale marketable securities (239,383 ) (84,758 )
Proceeds from sale of available-for-sale marketable securities 91,150 60,007
Net increase in restricted cash (3,749 )  
 
Net cash used in investing activities (170,846 ) (28,674 )
Cash flows from financing activities:
Proceeds from exercise of stock options 7,838 6,975
Excess tax benefit associated with equity awards 4,386 957
Payment of acquisition-related earn-out (380 ) (251 )
Repayment of obligations under capital leases (41 ) (105 )
Proceeds from issuance of convertible senior notes 287,500
Payment of costs associated with issuance of convertible senior notes (8,144 )
Acquisition of treasury stock (10,748 ) (3,440 )
Repayment of notes payable (48 )  
 
Net cash provided by financing activities 280,363   4,136  
 
Net increase (decrease) in cash and cash equivalents 159,025 (7,836 )
Effect of exchange rate changes on cash and cash equivalents (63 ) 26
Cash and cash equivalents - Beginning of period 32,683   45,214  
Cash and cash equivalents - End of period $ 191,645   $ 37,404  
 

Investors:
Medidata Solutions
Hulus Alpay, 212-419-1025
halpay@mdsol.com
or
Media:
Gail Janowitz, 212-918-1792
gjanowitz@mdsol.com

Products
  • Globe Unlimited

    Digital all access pass across devices. subscribe

  • The Globe and Mail Newspaper

    Newspaper delivered to your doorstep. subscribe

  • Globe2Go

    The digital replica of our newspaper. subscribe

  • Globe eBooks

    A collection of articles by the Globe. subscribe

See all Globe Products

Advertise with us

GlobeLink.ca

Your number one partner for reaching Canada's Influential Achievers. learn more

The Globe at your Workplace
Our Company
Customer Service
Globe Recognition
Mobile Apps
NEWS APP
INVESTING APP
Other Sections