Medidata Solutions Reports Second Quarter 2012 Results
- Announces $100+ million contract for Medidata clinical cloud
- Reports record quarterly revenues of $53.5 million
- Adds record number of new customers
- Raises full year revenue guidance to between $217 and $219 million
NEW YORK, N.Y. – July 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 second quarter of 2012, and provided detailed financial guidance for the third quarter and full year 2012.
The company also announced a significant contract with a division of a top ten pharmaceutical company, an existing customer, which selected Medidata's clinical cloud for its global clinical technology needs. The largest contract in Medidata's history, the contract is worth in excess of $100 million over five years inclusive of a multi-year adoption ramp and assuming certain options are exercised. This milestone transaction provides Medidata's customer with access to its entire platform, enabling operational innovation in clinical development across all business processes and roles.
"Medidata's stellar second quarter results clearly demonstrate the value of our cloud-based platform, evidenced by significant customer growth and a landmark nine-figure contract. Our execution is reshaping the competitive landscape and in the process building sustainable competitive advantage for Medidata," said Tarek Sherif, Medidata's chief executive officer. "We are in the early stages of an adoption cycle for cloud-based solutions and will continue to invest in our mission to become the technology backbone of the clinical development process. Our business model, platform interoperability and customer responsiveness underpin our business goals of enabling life science companies to bring their drugs to market with shorter timelines, lower cost and less risk, while supporting our ability to innovate and build value. We are transforming clinical development operations and ultimately creating competitive advantage for our customers."
Second Quarter Highlights
Record revenues for the quarter of $53.5 million, which exceeded the high end of guidance, reflect record professional services billings, strong cross sales and increasing customer acceptance of Medidata's clinical cloud platform. Revenues for the quarter increased 6% sequentially.
Application services revenue increased 8% sequentially, reflecting market share gains and growth in adoption of Rave and non-Rave products across our installed base of customers. Remaining year backlog was $80 million, an increase of 28% versus the comparable period in 2011.
For the quarter, non-Rave revenue increased 100% year over year and 34% sequentially. For the first half of 2012 non-Rave revenues grew 87% year over year.
A record 33 new customers were added in the quarter, bringing the total number of customers to 316, up 36% year over year. Medidata added over 100 new customers in the past 12 months, while continuing its high customer retention and revenue retention rates of approximately 99% for the quarter.
Both new and existing customers increasingly looked to use applications across Medidata's platform, with a record 30% of all new customers contracting for multiple solutions.
A study conducted by the Center for the Study of Drug Development at Tufts University School of Medicine and sponsored by Medidata found that up to 24% of medical procedures conducted in clinical trials may be unnecessary at a cost of $3–5 billion annually. The research, which will appear in an upcoming issue of Nature Medicine, a premier journal for biomedical research, relied on Medidata's study and protocol design solution to collect and analyze data from 15 participating pharmaceutical companies. Medidata's solution, which provides visibility into cost and other metrics associated with a study's design, is used by customers like GlaxoSmithKline to develop efficient study protocols, reduce trial complexity and streamline clinical trials.
Medidata had multiple product releases including: broadened capabilities for capturing safety events; a new clinical analytics tool for site quality management; new built-in integrations between Medidata CTMS™ and Medidata Rave®; a new tool to assist drug companies in handling physician-initiated studies; and expanded capabilities in randomization and trial supply management.
Raises full year revenue guidance and provides third quarter guidance.
Mr. Sherif continued, "Sales were strong across the board this quarter, providing solid backlog as we enter the second half of the year. This, combined with our large pipeline of opportunities, is driving our accelerating momentum despite current macroeconomic headwinds, positioning us well for the remainder of 2012."
Revenues for the second quarter of 2012 were a record $53.5 million, compared with $50.2 million in the second quarter of 2011. Year to date, revenues increased 19% over the comparable period, excluding the one-time $3.5 million acceleration of revenue in the second quarter of 2011. Application services revenues for the second quarter of 2012 increased approximately $2.5 million year over year or 8% sequentially to $41.5 million.
Gross margins in the second quarter of 2012 of 71% were flat versus a year ago, adjusted for the one-time acceleration of revenue.
Second quarter 2012 operating and net income figures reflect increased investments in R&D and sales and marketing. Second quarter 2012 net income figures also reflect increased income taxes resulting from a higher effective tax rate. Second quarter 2011 operating income and net income figures include the one-time acceleration of revenue.
GAAP operating income for the second quarter of 2012 was $5.7 million, compared with $10.7 million a year ago. Non-GAAP operating income* for the quarter was $11.0 million, compared with $15.0 million a year ago.
GAAP net income for the second quarter of 2012 was $3.6 million, or $0.14 per diluted share, compared with $10.0 million, or $0.40 per diluted share, in the second quarter of 2011. Non-GAAP net income* for the second quarter of 2012 was $7.3 million, or $0.29 per diluted share, compared with $12.6 million, or $0.51 per diluted share, in the second quarter of 2011. Adjusted non-GAAP net income* for the second quarter of 2012 was $5.8 million, or $0.23 per diluted share, compared with $12.6 million, or $0.51 per diluted share, in the second quarter of 2011.
Total cash, cash equivalents and marketable securities were $113.9 million at the end of the second quarter, an increase of $6.2 million from the fourth quarter 2011. Year to date, the company generated cash flow from operations of $8.2 million.
For the full year 2012, the company expects revenues to be between $217 and $219 million, compared with prior guidance of $213 and $217 million. Professional services revenues are expected to be in the high $40.0 million range. Non-GAAP operating income is now expected to be between $52.0 and $54.5 million, compared with prior guidance of between $51.5 and $54.5 million. Based on current estimates, this would equate to GAAP operating income between $32.5 and $35.0 million. Non-GAAP net income is now expected to be between $33.0 and $35.5 million, compared with prior guidance of between $32.5 and $35.5 million. Based on current estimates, this would equate to GAAP net income between $20.0 and $22.5 million. The company now expects adjusted non-GAAP net income, which includes tax impact, primarily from stock-based compensation and amortization at a 40% effective tax rate, to be between $27.5 and $30.0 million, compared with prior guidance of between $27.0 and $30.0 million.
Remaining application services backlog as of June 30, 2012 increased to $80 million, an increase of 28% over the comparable period a year ago. This compares with a 4% increase in remaining application services backlog as of June 30, 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 third quarter of 2012, the company expects revenues to be between $55.5 and $56.5 million. The company expects non-GAAP operating income to be between $14.0 and $15.0 million. Based on current estimates this would equate to GAAP operating income of between $9.0 and $10.0 million. Non-GAAP net income is expected to be between $8.5 and $9.5 million. Based on current estimates, this would equate to GAAP net income of between $5.0 and $6.0 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 $7.5 and $8.5 million.
While changes in the stock price could change the fully diluted share count, the company is assuming 25.7 and 25.4 million fully diluted shares in the third quarter and full year, respectively.
"The Medidata team continued its outstanding execution this quarter with our record-setting results serving as the latest proof points," said Cory Douglas, Medidata's chief financial officer. "We expect to continue to drive revenue growth through strategic investments in innovation and in our global sales organization while maintaining our historic focus on strong margins and cash generation. Reflecting the increased momentum we see in our business, we are pleased to once again raise our full year revenue outlook."
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 Tuesday, August 14, 2012 by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 97331788. 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.
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.
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