FOR IMMEDIATE RELEASE
Application services revenue up 12%
GAAP diluted EPS up 63%
Cash flows from operations up 490% to $5.8 million
19 new customer wins
Confirms full year and provides second quarter 2011 guidance
NEW YORK, N.Y. – May 10, 2011 – Medidata Solutions (NASDAQ: MDSO), a leading global provider of SaaS-based clinical technology solutions that enhance the efficiency of clinical development, today announced its financial results for the first quarter 2011, as well as provided financial guidance for the second quarter and full year 2011.
“Our sales and product momentum position us as the leading independent provider of solutions that improve decision effectiveness, lower overall cost and improve time to market in new drug development. We are executing well, while our focus on innovation is allowing us to grow our total addressable market,” said Tarek Sherif, chairman and chief executive officer of Medidata. “The core of our business is healthy and growing, and we are very excited about the opportunities that lie before us, particularly given the favorable competitive environment. Medidata’s product strategy is being fully embraced by our customers. Our reputation for integrity, high-quality service and products, and our single-minded focus on making our customers successful is driving continued market share gains for our company.”
Business Highlights
Medidata reported healthy growth in revenues and profitability in the first quarter of 2011, driven by solid execution and robust business development. Sales were particularly strong to middle market biopharmaceutical, medical device and diagnostic customers. Rave, Medidata’s EDC/CDMS platform, represented the majority of the growth, pointing to the continued health of our core market.
Nineteen companies became new customers in the first quarter of 2011. Strong sales through our contract research organization (CRO) and direct channels contributed to Medidata’s sales momentum. This increase represents the seventh consecutive quarter of double-digit customer growth. New customers this quarter include: biopharmaceutical companies InterMune Pharmaceuticals, Inc., Relypsa, Inc. and Zalicus Inc.; device and diagnostic companies ABIOMED, Inc., Arteriocyte, Inc., Cook Medical Inc. and Siemens Medical Solutions; and academic research centers Brown University Oncology Group and Chiba University, Japan. Three entities of current parent customers, including two top 25 biopharmaceutical companies, contracted with Medidata. Fourteen existing customers extended their relationship with Medidata, either renewing and/or contracting for new products.
Over the past 15 months, Medidata has significantly grown its potential market through innovation and new product introductions. The expanding portfolio of products is gaining traction, as highlighted by GlaxoSmithKline’s enterprise commitment to the protocol development tool Medidata Designer®. Building an optimal protocol with the use of Medidata Designer brings efficiencies throughout a trial’s life. This is a good example of how Medidata’s platform is designed to optimize clinical trials from concept to conclusion. At this point, approximately 25% of Medidata’s 232 customers contract for multiple products, and the company expects this percentage to increase.
Medidata released two new products during the first quarter, continuing the roll-out of solutions that enhance the productivity and decision effectiveness of our customers’ drug development efforts. Medidata Insights™ is a business analytics solution that enhances decision making through advanced reporting and benchmarked metrics, without the need for time-consuming and expensive implementations. Medidata Grants Manager Contracting™ is a centralized and scalable solution to efficiently manage site budgets and negotiations.
A new CRO partner headquartered in the U.K. brings the number of Medidata ASPire to Win® partners to 32. In addition, four partners reached higher accreditation levels, increasing their investment in training on Medidata products to better serve customers with Rave-related services.
With the addition of Clinverse during the first quarter, the Medidata Technology Partner Program now includes 13 companies. Clinverse’s products include SaaS-based financial management and payment solutions critical for more efficiently running clinical trials. The Technology Partner Program expands the ability of customers to integrate additional applications with Medidata offerings. Currently, 96 organizations participate in Medidata Developer Central, an online developer community dedicated to users of the Rave Web Services API that provides an array of resources to support integration efforts.
Financial Highlights
Net revenues for the first quarter of 2011 were $40.8 million, an increase of $3.1 million, or 8%, compared with $37.6 million in the first quarter of 2010. The increase in revenues was due to a $3.7 million, or 12%, increase in revenues from application services, partially offset by a decline in revenues from professional services, which continues to represent a smaller portion of the company’s total revenue. Approximately $0.5 million of revenue that was expected in the first quarter is now expected to be recognized in the second quarter, which is reflected in the company’s second quarter guidance.
Gross margins in the first quarter of 2011 were 68%, an increase of approximately 2 percentage points over gross margins of 66% a year ago.
Non-GAAP operating income* for the first quarter of 2011 increased 8% to $7.2 million, compared with $6.7 million a year ago. GAAP operating income for the quarter increased 18% to $3.5 million, compared with $2.9 million a year ago.
Non-GAAP net income for the first quarter of 2011 increased to $5.3 million, or $0.21 per diluted share, compared with $3.4 million, or $0.14 per diluted share, in the first quarter of 2010. GAAP net income for the first quarter of 2011 increased to $3.2 million, or $0.13 per diluted share, compared with $1.9 million, or $0.08 per diluted share, in the first quarter of 2010.
Cash flow from operations for the first quarter increased to $5.8 million, due to the company’s improving profitability and changes in working capital.
Financial Outlook
For the full year 2011, the company confirms its previous guidance of expected revenues between $180 and $188 million. Non-GAAP operating income is expected to be between $43 and $47 million. Based on current estimates, this would equate to GAAP operating income between $26 and $30 million. Non-GAAP net income is expected to be between $35 and $39 million. Based on current estimates, this would equate to GAAP net income between $25 and $29 million. Cash flow from operations is expected to be over $40 million.
Total remaining backlog for 2011 was $104 million at the end of the first quarter. Remaining year backlog represents the amount of contractual revenue already booked, which is expected to be recognized during the remainder of the year. The difference between the backlog and balance of revenue guidance for the remainder of the year includes renewals of large agreements and new product traction, as well as additional business from new and existing customers.
For the second quarter of 2011, the company expects revenues to be between $44.5 and $45.5 million. This includes $0.5 million of revenue that was expected to be recognized in the first quarter. The company expects non-GAAP operating income to be between $10.5 and $11.5 million. Based on current estimates this would equate to GAAP operating income of $6.0 and $7.0 million. Non-GAAP net income is expected to be between $8.0 and $9.0 million. Based on current estimates, this would equate to GAAP net income of between $5.5 and $6.5 million.
While changes in the stock price could change the fully diluted share count, the company is assuming 25.0 and 25.1 million fully diluted shares in the second quarter and full year, respectively.
Bruce Dalziel, chief financial officer and executive vice president, compliance, noted, “We have established a steady and consistent track record of gross margin expansion, high renewal rates and overall profitable growth. As reflected in our first quarter results, 2011 is expected to be a good year in terms of profitability and operating cash flow growth.”
Conference Call
The company plans to host its investor conference call today at 5:00 p.m. Eastern Time to discuss its financial results for the first quarter and its outlook for the second quarter and full year 2011. 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 24, 2011 by dialing 800-642-1687 domestically or 706-645-9291 internationally, with the passcode 62194054. 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 SaaS 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 protocol development (Medidata Designer®), trial planning and management (Medidata Grants Manager®, Medidata CRO Contractor®), clinical portal (iMedidata™), randomization and trial supply management (Medidata Balance™), monitoring (Medidata Rave Monitor, Medidata Rave Targeted SDV), safety events capture (Medidata Rave Safety Gateway), clinical data capture and management (Medidata Rave®) to advanced reporting and analytics (Medidata Insights™). 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, 2010. 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.
Investor Contact:
Hulus Alpay
Medidata Solutions
212.419.1025
halpay@mdsol.com
Media Contact:
Susan McCarron
Lois Paul & Partners
781.782.5767
Susan_McCarron@lpp.com