Medidata Solutions Reports Record First Quarter 2013 Results

Mon Apr 29, 2013 6:30am EDT

Medidata Solutions Reports Record First Quarter 2013 Results

  • Record revenues of $63.3 million, a 26% year-over-year increase
  • Record application services revenue of $50.7 million, a 32% year-over-year increase
  • Raises 2013 revenue guidance to between $270 and $274 million

Medidata Solutions (NASDAQ: MDSO), the leading global provider of cloud-based solutions for the life sciences industry, today announced its financial results for the first quarter 2013 and provided detailed financial guidance.

"With Medidata's customers increasingly relying on our Clinical Cloud platform, we had an impressive first quarter, and have set the foundation for strong performance in the remainder of 2013," said Tarek Sherif, Medidata's chief executive officer. "Our revenue growth is accelerating, our backlog is showing meaningful growth and our customer and revenue retention rates are impressive, all of which are indicative of the attractiveness of our platform and business model. Life science companies are rapidly moving to the cloud and away from the legacy, on-premise solutions offered by our competitors. We expect to continue to be the primary beneficiary of this transition, building value for our customers and shareholders."

First Quarter 2013 Results

  • Total revenues for the first quarter of 2013 were $63.3 million, an increase of $12.9 million, or 26%, compared with $50.4 million in 2012. Application services revenue was $50.7 million, an increase of 32% compared with the same period last year.
  • GAAP operating income for the quarter increased to $7.1 million, up 16%, compared with $6.1 million a year ago. Non-GAAP operating income* for the first quarter of 2013 increased to $14.2 million, up 37%, compared with $10.3 million a year ago.
  • GAAP net income for the first quarter of 2013 was $5.7 million, or $0.22 per diluted share, up 51%, compared with $3.8 million, or $0.15 per diluted share, in the first quarter of 2012. Adjusted non-GAAP net income* for the first quarter of 2013 was $9.1 million, or $0.35 per diluted share, up 69%, compared with $5.4 million, or $0.22 per diluted share, in the first quarter of 2012.
  • Application services backlog for the remainder of the year (remaining backlog) as of March 31, 2013, increased to $156 million, up 46% over the comparable period a year ago. This compares with a 34% increase in remaining backlog over the comparable period in the prior year. Non-Rave products account for 22% of remaining backlog.
  • Total cash, cash equivalents and marketable securities were $124.0 million at the end of the first quarter, an increase of $12.8 million as compared with $111.2 million at the end of the first quarter 2012.

Additional Highlights

  • Medidata's customer base grew to 358 in the first quarter of 2013, up 25% from the first quarter of 2012.
  • 41% of customers had committed to multiple products at the end of the first quarter of 2013 as compared with 38% at the end of the fourth quarter of 2012.
  • Non-Rave revenues increased 125% year-over-year, driven by healthy growth in Medidata's patient randomization, medical coding, safety data capture, protocol design, business analytics and trial management solutions.
  • Medidata's revenue retention rate for the quarter was 99.9%.

"Our investments are intended to enhance long-term growth and we are seeing positive signs of their impact in our results," said Cory Douglas, chief financial officer. "We are confident in our ability to drive sustained growth in 2013 and in the years to come."

Financial Outlook

For the full year 2013, the company now expects:

  • Revenues between $270.0 and $274.0 million.
  • Professional services revenues in the high $40 million range.
  • Non-GAAP operating income between $61.0 and $64.0 million. Based on current estimates, this would equate to GAAP operating income between $23.0 and $26.0 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact primarily from stock-based compensation and amortization at a 40% effective tax rate, between $31.5 and $34.5 million. Based on current estimates, this would equate to GAAP net income between $13.5 and $16.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.7 million fully diluted shares.

For the second quarter of 2013, the company expects:

  • Revenues between $65.5 and $67.0 million.
  • Non-GAAP operating income between $14.0 and $15.0 million. Based on current estimates, this would equate to GAAP operating income between $3.5 and $4.5 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact primarily from stock-based compensation and amortization at a 40% effective tax rate, between $7.0 and $8.0 million. Based on current estimates, this would equate to GAAP net income between $1.5 and $2.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.7 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 athttp://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 Monday, May 13, 2013 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 35896019. 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, 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, and an 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 an 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 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 March 31,
    2013   2012
Revenues        
Application services   $ 50,652     $ 38,396  
Professional services   12,607     11,963  
Total revenues   63,259     50,359  
Cost of revenues (1)(2)        
Application services   9,025     7,484  
Professional services   8,104     7,131  
Total cost of revenues   17,129     14,615  
Gross profit   46,130     35,744  
Operating costs and expenses:        
Research and development(1)   11,905     9,955  
Sales and marketing (1)(2)   14,489     10,383  
General and administrative (1)   12,644     9,290  
Total operating costs and expenses   39,038     29,628  
Operating income   7,092     6,116  
Interest and other income (expense):        
Interest expense   (18 )   (21 )
Interest income   76     71  
Other income, net   154      
Total interest and other income, net   212     50  
Income before income taxes   7,304     6,166  
Provision for income taxes   1,604     2,396  
Net income   $ 5,700     $ 3,770  
Earnings per share:        
Basic   $ 0.23     $ 0.16  
Diluted   $ 0.22     $ 0.15  
Weighted average common shares outstanding:        
Basic   25,120     24,017  
Diluted   26,261     24,842  
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues   $ 487     $ 295  
Research and development   458     192  
Sales and marketing   1,222     564  
General and administrative   3,038     1,103  
Total stock-based compensation   $ 5,205     $ 2,154  
(2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues   $ 281     $ 318  
Sales and marketing   113     129  
Total amortization of intangible assets   $ 394     $ 447  
                 

 

 
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 March 31,
    2013   2012
Operating income:        
GAAP operating income   $ 7,092     $ 6,116  
GAAP operating margins   11.2 %   12.1 %
Stock-based compensation   5,205     2,154  
Depreciation and amortization   1,851     1,994  
Contingent consideration adjustment (1)   60     80  
Non-GAAP operating income   $ 14,208     $ 10,344  
Non-GAAP operating margins   22.5 %   20.5 %
Net income:        
GAAP net income   $ 5,700     $ 3,770  
Stock-based compensation   5,205     2,154  
Amortization   394     447  
Contingent consideration adjustment (1)   60     80  
Non-GAAP net income   11,359     6,451  
Tax impact on add-back items (2)   (2,264 )   (1,072 )
Adjusted non-GAAP net income   $ 9,095     $ 5,379  
GAAP basic earnings per share   $ 0.23     $ 0.16  
GAAP diluted earnings per share   $ 0.22     $ 0.15  
Non-GAAP basic earnings per share   $ 0.45     $ 0.27  
Non-GAAP diluted earnings per share   $ 0.43     $ 0.26  
Adjusted Non-GAAP basic earnings per share   $ 0.36     $ 0.22  
Adjusted Non-GAAP diluted earnings per share   $ 0.35     $ 0.22  
(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 months ended March 31, 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, 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)
    March 31, 2013   December 31, 2012
ASSETS        
Current assets:        
Cash and cash equivalents   $ 37,291     $ 32,683  
Marketable securities   83,086     89,871  
Accounts receivable, net of allowance for doubtful accounts of $1,130 and $747, respectively   48,398     42,359  
Prepaid commission expense   3,113     2,281  
Prepaid expenses and other current assets   7,717     8,042  
Deferred income taxes   6,731     7,465  
Total current assets   186,336     182,701  
Restricted cash       388  
Furniture, fixtures and equipment, net   10,542     10,474  
Marketable securities, long-term   3,655      
Goodwill   15,081     15,382  
Intangible assets, net   1,230     1,708  
Deferred income taxes, long-term   10,752     11,055  
Other assets   2,823     2,923  
Total assets   $ 230,419     $ 224,631  
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 1,319     $ 2,998  
Accrued payroll and other compensation   7,716     14,140  
Accrued expenses and other   7,134     6,674  
Deferred revenue   53,213     50,348  
Capital lease obligations   55     55  
Total current liabilities   69,437     74,215  
Noncurrent liabilities:        
Deferred revenue, less current portion   3,722     4,323  
Deferred tax liabilities   293     624  
Capital lease obligations, less current portion   86     100  
Other long-term liabilities   2,739     3,278  
Total noncurrent liabilities   6,840     8,325  
Total liabilities   76,277     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, 26,946 and 26,405 shares issued; 26,570 and 26,039 shares outstanding, respectively   269     264  
Additional paid-in capital   168,102     160,637  
Treasury stock, 376 and 366 shares, respectively   (5,752 )   (5,626 )
Accumulated other comprehensive income (loss)   (1,056 )   (63 )
Accumulated deficit   (7,421 )   (13,121 )
Total stockholders' equity   154,142     142,091  
Total liabilities and stockholders' equity   $ 230,419     $ 224,631  
                 

 

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
    Three Months Ended March 31,
    2013   2012
Cash flows from operating activities:        
Net income   $ 5,700     $ 3,770  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   1,851     1,994  
Stock-based compensation   5,205     2,154  
Amortization of discounts or premiums on marketable securities   504     317  
Deferred income taxes   718     272  
Amortization of debt issuance costs   15     15  
Excess tax benefit associated with equity awards   (610 )   (1,264 )
Contingent consideration adjustment   60     80  
Provision for doubtful accounts   657     51  
Changes in operating assets and liabilities:        
Accounts receivable   (4,249 )   (5,809 )
Prepaid commission expense   (917 )   (321 )
Prepaid expenses and other current assets   684     (97 )
Other assets   (73 )   (133 )
Accounts payable   (1,558 )   (1,438 )
Accrued payroll and other compensation   (6,643 )   (4,048 )
Accrued expenses and other   1,518     2,107  
Deferred revenue   (287 )   4,941  
Other long-term liabilities   322     (43 )
Net cash provided by operating activities   2,897     2,548  
Cash flows from investing activities:        
Purchase of furniture, fixtures and equipment   (2,947 )   (1,821 )
Purchase of available-for-sale marketable securities   (27,416 )   (20,440 )
Proceeds from sale of available-for-sale marketable securities   30,030     29,757  
Decrease in restricted cash   388      
Net cash provided by investing activities   55     7,496  
Cash flows from financing activities:        
Proceeds from exercise of stock options   1,655     2,216  
Excess tax benefit associated with equity awards   610     1,264  
Payment of acquisition-related earn-out   (380 )   (251 )
Repayment of obligations under capital leases   (14 )   (56 )
Acquisition of treasury stock   (126 )   (50 )
Repayment of notes payable   (38 )    
Net cash provided by financing activities   1,707     3,123  
Net increase in cash and cash equivalents   4,659     13,167  
Effect of exchange rate changes on cash and cash equivalents   (51 )   6  
Cash and cash equivalents - Beginning of period   32,683     45,214  
Cash and cash equivalents - End of period   $ 37,291     $ 58,387  
                 

 

Investor Contact:
Medidata Solutions
Hulus Alpay, 212-419-1025
[email protected]
or
Media Contact:
Edelman
Geoff Curtis, 212-277-3718
[email protected]Mon Apr 29, 2013 6:30am EDT

 

Medidata Solutions Reports Record First Quarter 2013 Results

  • Record revenues of $63.3 million, a 26% year-over-year increase
  • Record application services revenue of $50.7 million, a 32% year-over-year increase
  • Raises 2013 revenue guidance to between $270 and $274 million

 

Medidata Solutions (NASDAQ: MDSO), the leading global provider of cloud-based solutions for the life sciences industry, today announced its financial results for the first quarter 2013 and provided detailed financial guidance.

"With Medidata's customers increasingly relying on our Clinical Cloud platform, we had an impressive first quarter, and have set the foundation for strong performance in the remainder of 2013," said Tarek Sherif, Medidata's chief executive officer. "Our revenue growth is accelerating, our backlog is showing meaningful growth and our customer and revenue retention rates are impressive, all of which are indicative of the attractiveness of our platform and business model. Life science companies are rapidly moving to the cloud and away from the legacy, on-premise solutions offered by our competitors. We expect to continue to be the primary beneficiary of this transition, building value for our customers and shareholders."

First Quarter 2013 Results

  • Total revenues for the first quarter of 2013 were $63.3 million, an increase of $12.9 million, or 26%, compared with $50.4 million in 2012. Application services revenue was $50.7 million, an increase of 32% compared with the same period last year.
  • GAAP operating income for the quarter increased to $7.1 million, up 16%, compared with $6.1 million a year ago. Non-GAAP operating income* for the first quarter of 2013 increased to $14.2 million, up 37%, compared with $10.3 million a year ago.
  • GAAP net income for the first quarter of 2013 was $5.7 million, or $0.22 per diluted share, up 51%, compared with $3.8 million, or $0.15 per diluted share, in the first quarter of 2012. Adjusted non-GAAP net income* for the first quarter of 2013 was $9.1 million, or $0.35 per diluted share, up 69%, compared with $5.4 million, or $0.22 per diluted share, in the first quarter of 2012.
  • Application services backlog for the remainder of the year (remaining backlog) as of March 31, 2013, increased to $156 million, up 46% over the comparable period a year ago. This compares with a 34% increase in remaining backlog over the comparable period in the prior year. Non-Rave products account for 22% of remaining backlog.
  • Total cash, cash equivalents and marketable securities were $124.0 million at the end of the first quarter, an increase of $12.8 million as compared with $111.2 million at the end of the first quarter 2012.

Additional Highlights

  • Medidata's customer base grew to 358 in the first quarter of 2013, up 25% from the first quarter of 2012.
  • 41% of customers had committed to multiple products at the end of the first quarter of 2013 as compared with 38% at the end of the fourth quarter of 2012.
  • Non-Rave revenues increased 125% year-over-year, driven by healthy growth in Medidata's patient randomization, medical coding, safety data capture, protocol design, business analytics and trial management solutions.
  • Medidata's revenue retention rate for the quarter was 99.9%.

"Our investments are intended to enhance long-term growth and we are seeing positive signs of their impact in our results," said Cory Douglas, chief financial officer. "We are confident in our ability to drive sustained growth in 2013 and in the years to come."

Financial Outlook

For the full year 2013, the company now expects:

  • Revenues between $270.0 and $274.0 million.
  • Professional services revenues in the high $40 million range.
  • Non-GAAP operating income between $61.0 and $64.0 million. Based on current estimates, this would equate to GAAP operating income between $23.0 and $26.0 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact primarily from stock-based compensation and amortization at a 40% effective tax rate, between $31.5 and $34.5 million. Based on current estimates, this would equate to GAAP net income between $13.5 and $16.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.7 million fully diluted shares.

For the second quarter of 2013, the company expects:

  • Revenues between $65.5 and $67.0 million.
  • Non-GAAP operating income between $14.0 and $15.0 million. Based on current estimates, this would equate to GAAP operating income between $3.5 and $4.5 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact primarily from stock-based compensation and amortization at a 40% effective tax rate, between $7.0 and $8.0 million. Based on current estimates, this would equate to GAAP net income between $1.5 and $2.5 million.
  • While changes in the stock price could change the fully diluted share count, the company is assuming 26.7 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 athttp://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 Monday, May 13, 2013 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 35896019. 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, 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, and an 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 an 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 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 March 31,
    2013   2012
Revenues        
Application services   $ 50,652     $ 38,396  
Professional services   12,607     11,963  
Total revenues   63,259     50,359  
Cost of revenues (1)(2)        
Application services   9,025     7,484  
Professional services   8,104     7,131  
Total cost of revenues   17,129     14,615  
Gross profit   46,130     35,744  
Operating costs and expenses:        
Research and development(1)   11,905     9,955  
Sales and marketing (1)(2)   14,489     10,383  
General and administrative (1)   12,644     9,290  
Total operating costs and expenses   39,038     29,628  
Operating income   7,092     6,116  
Interest and other income (expense):        
Interest expense   (18 )   (21 )
Interest income   76     71  
Other income, net   154      
Total interest and other income, net   212     50  
Income before income taxes   7,304     6,166  
Provision for income taxes   1,604     2,396  
Net income   $ 5,700     $ 3,770  
Earnings per share:        
Basic   $ 0.23     $ 0.16  
Diluted   $ 0.22     $ 0.15  
Weighted average common shares outstanding:        
Basic   25,120     24,017  
Diluted   26,261     24,842  
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows:
Cost of revenues   $ 487     $ 295  
Research and development   458     192  
Sales and marketing   1,222     564  
General and administrative   3,038     1,103  
Total stock-based compensation   $ 5,205     $ 2,154  
(2) Amortization expense of intangible assets included in costs of revenues and operating costs and expenses is as follows:
Cost of revenues   $ 281     $ 318  
Sales and marketing   113     129  
Total amortization of intangible assets   $ 394     $ 447  
                 

 

 
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 March 31,
    2013   2012
Operating income:        
GAAP operating income   $ 7,092     $ 6,116  
GAAP operating margins   11.2 %   12.1 %
Stock-based compensation   5,205     2,154  
Depreciation and amortization   1,851     1,994  
Contingent consideration adjustment (1)   60     80  
Non-GAAP operating income   $ 14,208     $ 10,344  
Non-GAAP operating margins   22.5 %   20.5 %
Net income:        
GAAP net income   $ 5,700     $ 3,770  
Stock-based compensation   5,205     2,154  
Amortization   394     447  
Contingent consideration adjustment (1)   60     80  
Non-GAAP net income   11,359     6,451  
Tax impact on add-back items (2)   (2,264 )   (1,072 )
Adjusted non-GAAP net income   $ 9,095     $ 5,379  
GAAP basic earnings per share   $ 0.23     $ 0.16  
GAAP diluted earnings per share   $ 0.22     $ 0.15  
Non-GAAP basic earnings per share   $ 0.45     $ 0.27  
Non-GAAP diluted earnings per share   $ 0.43     $ 0.26  
Adjusted Non-GAAP basic earnings per share   $ 0.36     $ 0.22  
Adjusted Non-GAAP diluted earnings per share   $ 0.35     $ 0.22  
(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 months ended March 31, 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, 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)
    March 31, 2013   December 31, 2012
ASSETS        
Current assets:        
Cash and cash equivalents   $ 37,291     $ 32,683  
Marketable securities   83,086     89,871  
Accounts receivable, net of allowance for doubtful accounts of $1,130 and $747, respectively   48,398     42,359  
Prepaid commission expense   3,113     2,281  
Prepaid expenses and other current assets   7,717     8,042  
Deferred income taxes   6,731     7,465  
Total current assets   186,336     182,701  
Restricted cash       388  
Furniture, fixtures and equipment, net   10,542     10,474  
Marketable securities, long-term   3,655      
Goodwill   15,081     15,382  
Intangible assets, net   1,230     1,708  
Deferred income taxes, long-term   10,752     11,055  
Other assets   2,823     2,923  
Total assets   $ 230,419     $ 224,631  
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 1,319     $ 2,998  
Accrued payroll and other compensation   7,716     14,140  
Accrued expenses and other   7,134     6,674  
Deferred revenue   53,213     50,348  
Capital lease obligations   55     55  
Total current liabilities   69,437     74,215  
Noncurrent liabilities:        
Deferred revenue, less current portion   3,722     4,323  
Deferred tax liabilities   293     624  
Capital lease obligations, less current portion   86     100  
Other long-term liabilities   2,739     3,278  
Total noncurrent liabilities   6,840     8,325  
Total liabilities   76,277     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, 26,946 and 26,405 shares issued; 26,570 and 26,039 shares outstanding, respectively   269     264  
Additional paid-in capital   168,102     160,637  
Treasury stock, 376 and 366 shares, respectively   (5,752 )   (5,626 )
Accumulated other comprehensive income (loss)   (1,056 )   (63 )
Accumulated deficit   (7,421 )   (13,121 )
Total stockholders' equity   154,142     142,091  
Total liabilities and stockholders' equity   $ 230,419     $ 224,631  
                 

 

 
MEDIDATA SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
    Three Months Ended March 31,
    2013   2012
Cash flows from operating activities:        
Net income   $ 5,700     $ 3,770  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   1,851     1,994  
Stock-based compensation   5,205     2,154  
Amortization of discounts or premiums on marketable securities   504     317  
Deferred income taxes   718     272  
Amortization of debt issuance costs   15     15  
Excess tax benefit associated with equity awards   (610 )   (1,264 )
Contingent consideration adjustment   60     80  
Provision for doubtful accounts   657     51  
Changes in operating assets and liabilities:        
Accounts receivable   (4,249 )   (5,809 )
Prepaid commission expense   (917 )   (321 )
Prepaid expenses and other current assets   684     (97 )
Other assets   (73 )   (133 )
Accounts payable   (1,558 )   (1,438 )
Accrued payroll and other compensation   (6,643 )   (4,048 )
Accrued expenses and other   1,518     2,107  
Deferred revenue   (287 )   4,941  
Other long-term liabilities   322     (43 )
Net cash provided by operating activities   2,897     2,548  
Cash flows from investing activities:        
Purchase of furniture, fixtures and equipment   (2,947 )   (1,821 )
Purchase of available-for-sale marketable securities   (27,416 )   (20,440 )
Proceeds from sale of available-for-sale marketable securities   30,030     29,757  
Decrease in restricted cash   388      
Net cash provided by investing activities   55     7,496  
Cash flows from financing activities:        
Proceeds from exercise of stock options   1,655     2,216  
Excess tax benefit associated with equity awards   610     1,264  
Payment of acquisition-related earn-out   (380 )   (251 )
Repayment of obligations under capital leases   (14 )   (56 )
Acquisition of treasury stock   (126 )   (50 )
Repayment of notes payable   (38 )    
Net cash provided by financing activities   1,707     3,123  
Net increase in cash and cash equivalents   4,659     13,167  
Effect of exchange rate changes on cash and cash equivalents   (51 )   6  
Cash and cash equivalents - Beginning of period   32,683     45,214  
Cash and cash equivalents - End of period   $ 37,291     $ 58,387  
                 

Investor Contact:
Medidata Solutions
Hulus Alpay, 212-419-1025
[email protected]
or
Media Contact:
Edelman
Geoff Curtis, 212-277-3718
[email protected]

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