Medidata Solutions Reports Record Fourth Quarter and Full Year 2009 Results
Net revenue increased 20% and 33% in Q4 and full year, respectively
Non-GAAP net income* increased to $3.5 million and $11.7 million in Q4 and full year, respectively
GAAP net income increased to $1.7 million and $5.2 million in Q4 and full year, respectively
NEW YORK, N.Y. - March 4, 2010 - Medidata Solutions (NASDAQ: MDSO), a leading global provider of hosted clinical development solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2009 and provided financial guidance for 2010.
"Medidata concluded 2009 with impressive execution and strong financial performance across the board. We further solidified our position as a market leader and have set the stage for an excellent 2010, based on our premier customer base, expanded backlog, rapidly scaling profitability and overall momentum," noted Tarek Sherif, chairman and chief executive officer of Medidata Solutions.
•Medidata welcomed 16 new customers in the fourth quarter, bringing its total customer count to 173 parent companies, up from 148 at the end of 2008, continuing to build on its track record of competitive wins and market share gains. New companies were added across all geographies and segments, with fourth quarter growth particularly strong in the mid-market segment. New customers included AVI BioPharma, which contracted for a broad set of Medidata products, including Rave, Grants Manager and CRO Contractor; Gename Ltd.; Prometheus Laboratories, Inc.; Quark Pharmaceuticals, Inc.; TyRx Pharma, Inc.; and Yakult Honsha Co., Ltd.
•Medidata product usage expanded at existing customers in the fourth quarter with the signing of eight new subsidiaries, primarily located in Europe, Japan and China.
•Medidata continued its momentum in the academic and research center market, with additional contracts from three major centers, including City of Hope National Medical Center in California.
•Medidata successfully signed renewals with all applicable multi-study, multi-year commitment customers. Many of these renewals included increased usage and expanded product line adoption. Several study-by-study customers also increased their adoption of Rave by signing multi-year, multi-study agreements this year, including Daiichi Sankyo Co. Ltd. and Seattle Genetics, Inc.
•Cross-sell efforts throughout 2009 resulted in increased uptake of Medidata's protocol authoring tool, with four customers piloting the use of Medidata Designer. Additionally, two Rave customers began using Grants Manager, bringing the total number of customers using both Rave and Grants Manager to 32.
•Two new CROs joined Medidata's partner program, including a leading global CRO and Medidata's first partner in Korea, bringing the total number of partners in its ASPire to Win partner program to 25. Additionally, four partners reached higher accreditation, increasing their investment to better serve customers with Rave-related services.
•During the fourth quarter, Medidata launched Rave Safety Gateway, aimed at simplifying the administration of safety-related responsibilities at clinical trial sponsors. This new tool allows customers' safety reporting systems to use data already collected and cleaned in Rave, saving time and expense in regulatory reporting of safety events during clinical trials.
Net revenues for the fourth quarter of 2009 were $37.6 million, an increase of $6.4 million, or 20%, compared with $31.2 million in the fourth quarter of 2008. The increase in revenues was due to a $6.6 million, or 30%, increase in revenues from application services, which improved gross and net margins significantly. Net revenues for the full year of 2009 were $140.4 million, an increase of $34.7 million, or 33%, compared with $105.7 million in 2008. The increase in revenues was primarily due to a $28.7 million, or 39%, increase in revenues from application services.
Medidata's net revenue growth in the fourth quarter and full year 2009 was driven by new customer additions, increased product uptake, cross-selling to existing customers, and increased usage by multi-year, multi-study and study-by-study customers.
Gross margins in the fourth quarter of 2009 were 67%, an increase of 6 percentage points over gross margins of 61% a year ago. For the full year 2009, gross margins were 64%, an increase of 12 percentage points over the 52% margins generated in 2008. Medidata's margin expansion was fueled by the accelerating market acceptance of Medidata's product and professional services strategy.
"Our easy-to-use, easy-to-learn advanced technology allows customers to implement and use our solutions on their own, while requiring lower levels of professional services and lowering total cost of ownership. This drives further adoption and improves our gross margin profile versus our competitors," noted Bruce Dalziel, Medidata's chief financial officer.
Non-GAAP operating income* for the fourth quarter of 2009 was $7.2 million, compared with $3.7 million in the fourth quarter of 2008. Non-GAAP operating income for the full year of 2009 was $24.1 million, compared with a loss of $3.8 million in 2008. GAAP operating income for the quarter was $3.1 million, compared with $0.5 million a year ago. GAAP operating income for the full year of 2009 was $8.8 million, compared with a loss of $15.7 million in 2008.
Non-GAAP net income for the fourth quarter of 2009 was $3.5 million, or $0.15 per diluted share, compared with $0.9 million, or $0.05 per diluted share, in the fourth quarter of 2008. Non-GAAP net income for the full year of 2009 was $11.7 million, or $0.57 per diluted share, compared with a loss of $13.8 million, or $2.11 per diluted share, in 2008. GAAP net income for the quarter was $1.7 million, or $0.07 per diluted share, compared with a loss of $0.4 million, or $0.08 per diluted share, in the fourth quarter of 2008. GAAP net income for the full year was $5.2 million, or $0.25 per diluted share, compared with a loss of $18.3 million, or $2.76 per diluted share, in 2008.
Total cash, cash equivalents and marketable securities were $89.1 million at the end of the fourth quarter versus $86.9 million at the end of the third quarter. For the full year, the company generated $28.2 million in cashflow from operations.
Mr. Sherif concluded, "At a time when drug companies are seeking increased clinical development throughput, Medidata's unique combination of cutting edge technology and customized levels of professional services is helping customers to achieve greater operating efficiencies. This compelling combination is resonating extremely well across our client base and with potential customers, and is driving our strong operating and financial performance. As long as we keep executing well and innovating, our customers' success becomes our success, and everyone benefits."
2010 Financial Outlook
For the full year 2010, the company expects revenues to be between $160 and $164 million. Non-GAAP operating income is expected to be between $29 and $31 million. Based on current estimates, this would equate to GAAP operating income between $13 and $15 million. Non-GAAP net income is expected to be between $16.5 and $18.5 million. Based on current estimates, this would equate to GAAP net income between $8 and $10 million.
Beginning of year backlog for full year 2010 was $132 million, which represents the amount of 2010 contractual revenue booked as of January 1, 2010. This compares to beginning of year backlog for full year 2009 as of January 1, 2009 of $117 million.
For the first quarter of 2010, the company expects revenues to be between $36 and $37 million. The company expects non-GAAP operating income to be between $5.0 and $6.0 million. Based on current estimates, this would equate to a GAAP operating income of $1.0 and $2.0 million. Non-GAAP net income is expected to be between $2.0 and $3.0 million. Based on current estimates, this would equate to a GAAP net income of between $0.5 and $1.5 million.
While changes in the stock price could change the fully diluted share count, the company is assuming 23.9 million and 24.1 million fully diluted shares in the first quarter and full year, respectively.
The company plans to host its investor conference call today at 5:00 p.m. Eastern Time to discuss its financial results for the fourth quarter and full year ended December 31, 2009 and its outlook for the first quarter and full year 2010. 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, March 18, 2010 by dialing 800-642-1687 domestically or 706-645-9291 internationally, with the passcode 56767569. 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 (www.mdsol.com) is a leading global provider of hosted clinical development solutions that enhance the efficiency of customers' clinical development processes and optimize their research and development investments. Medidata products and services allow customers to achieve clinical results more efficiently and effectively by streamlining the design, planning and management of key aspects of the clinical development process, including protocol development (Medidata Designer®), investigator benchmarking and budgeting (Medidata Grants ManagerTM), contract research organization (CRO) benchmarking and budgeting (Medidata CRO ContractorTM), and the capture, management, analysis and reporting of clinical trial data (Medidata Rave®). Medidata's diverse customer base spans pharmaceutical, biotechnology and medical device companies, academic institutions, CROs and other research organizations, and includes more than 20 of the top 25 global pharmaceutical companies.
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 prospectus filed on December 9, 2009 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. 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 purchased intangible assets and acquisition-related charges and stock-based compensation expense. Non-GAAP net income excludes the impact of amortization of intangible assets associated with acquisitions and stock-based compensation expense. 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.
Lois Paul & Partners