NEW YORK--Medidata Solutions (NASDAQ: MDSO), a leading global provider of cloud-based clinical technology solutions that enhance the efficiency of clinical development, today announced its financial results for the first quarter of 2012, and provided detailed financial guidance for the second quarter and full year 2012.
"We started 2012 with outstanding execution, exceeding our expectations and building on last year's momentum," said Tarek Sherif, Medidata's chief executive officer. "Our growth is being driven by a combination of competitive wins and takeaways, expanding relationships with our CRO partners and growing interest in the Medidata clinical cloud."
First Quarter Highlights
Revenues increased to $50.4 million, an increase of 24% year over year, exceeding the company's stated outlook range of $48.5 million to $49.5 million, as Medidata's platform continued to make strong market gains.
Gross margins were 71%, up 3 percentage points compared with the same quarter last year.
GAAP operating income increased 76% to $6.1 million. Non-GAAP operating income* increased 43% to $10.3 million.
Medidata added 17 new customers globally, increasing the customer base to 287, up 24% year over year. Growth came from direct sales and through the CRO partner channel.
Medidata's broad cloud-based platform saw strong demand from both new and existing customers in the first quarter: 24% of new customers purchased more than one product and 32% of customers use more than one product or additional modules.
Medidata announced a major new version of Medidata Balance™, its randomization and clinical trial supply management solution, significantly broadening its addressable market, while offering advanced technology that enables transformation of a key area of the clinical process.
FierceBiotech IT named Medidata President Glen de Vries one of 2011's "Top 10 Biotech Techies."
Mr. Sherif continued, "We are helping to shape the future of clinical development, as Medidata's platform increasingly becomes a standard in the life sciences industry. Given the changes happening in our industry, it is clear that we are in the early stages of a multi-year adoption cycle for our comprehensive cloud-based solution. Our ability to innovate and our team's great execution are driving our success and that of our customers, while building value for our shareholders."
Financial Highlights
Net revenues for the first quarter of 2012 were $50.4 million, compared with $40.8 million in the first quarter of 2011. The 24% increase in net revenues was due to a $5.0 million, or 15%, increase in revenues from application services and a $4.6 million, or 63%, increase in revenues from professional services.
Gross margins in the first quarter of 2012 were 71%, an increase of almost 3 percentage points over gross margins of 68% a year ago.
Non-GAAP operating income* for the first quarter of 2012 increased 43% to $10.3 million, compared with $7.2 million a year ago. GAAP operating income for the quarter increased 76% to $6.1 million, compared with $3.5 million a year ago.
Non-GAAP net income* for the first quarter of 2012 increased 22% to $6.5 million, or $0.26 per diluted share, compared with $5.3 million, or $0.21 per diluted share, in the first quarter of 2011. Adjusted non-GAAP net income* for the first quarter of 2012 was $5.4 million, or $0.22 per diluted share, compared with $5.3 million, or $0.21 per diluted share, in the first quarter of 2011. GAAP net income for the first quarter of 2012 increased to $3.8 million, or $0.15 per diluted share, compared with $3.2 million, or $0.13 per diluted share, in the first quarter of 2011.
Total cash, cash equivalents and marketable securities were $111.2 million at the end of the first quarter, an increase of $3.5 million from the fourth quarter. The company generated cash flow from operations of $2.5 million.
Financial Outlook
For the full year 2012, the company now expects revenues to be between $213 and $217 million. Professional services revenues are expected to be in the mid $40 million range. Non-GAAP operating income is now expected to be between $51.5 and $54.5 million. Based on current estimates, this would equate to GAAP operating income between $32.0 and $35.0 million. Non-GAAP net income is now expected to be between $32.5 and $35.5 million. Based on current estimates, this would equate to GAAP net income between $19.5 and $22.5 million. The company now expects adjusted non-GAAP net income, which includes tax impact, primarily on stock-based compensation and amortization at a 40% effective tax rate, to be between $27.0 and $30.0 million.
Remaining application services backlog as of March 31, 2012 increased 34% to $107 million over the comparable period a year ago. This compares with a 2% decline in remaining application services backlog as of March 31, 2011 over the comparable prior period. 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 second quarter of 2012, the company expects revenues to be between $51.5 and $52.5 million. The company expects non-GAAP operating income to be between $10.0 and $11.0 million. Based on current estimates this would equate to GAAP operating income of $5.0 and $6.0 million. Non-GAAP net income is expected to be between $6.0 and $7.0 million. Based on current estimates, this would equate to GAAP net income of between $3.0 and $4.0 million. The company expects adjusted non-GAAP net income, which includes tax impact, primarily on stock-based compensation and amortization at a 40% effective tax rate, to be between $5.0 and $6.0 million.
While changes in the stock price could change the fully diluted share count, the company is assuming 25.3 and 25.4 million fully diluted shares in the second quarter and full year, respectively.
"Medidata's strong start to the year and record quarterly revenues reinforce our belief that we are well positioned to achieve our long-term top line growth targets," said Cory Douglas, chief financial officer. "Our business momentum continues to build based on our record remaining application services backlog, growing market leadership and our team's great progress delivering the Medidata clinical cloud."
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 Tuesday, May 15, 2012 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 71377444. 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.