Medidata Solutions Reports Second Quarter 2011 Results

FOR IMMEDIATE RELEASE

Revenues increased 25% year on year
Cash flows from operations increased 290% year to date compared with 2010
Reiterates full year revenues and profitability guidance

NEW YORK, N.Y. – August 9, 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 second quarter 2011, as well as provided financial guidance for the third quarter and full year 2011.

Highlights

Revenues increased 25% year on year to $50.2 million, based on strong market adoption of its growing SaaS-based clinical development technology portfolio of products and the impact of renewals. Excluding a $3.5 million accounting impact of two large renewals, revenues increased 16% year on year to $46.7 million.

Gross margins were 73%, above the company’s previously stated long term target range.

Non-GAAP operating income* increased 81% to $15 million, including the $3.5 million accounting impact of two large renewals, and approximately $1 million in additional commissions and fees associated with the acceleration of revenues and the Clinical Force acquisition, which were not included in guidance.

The company generated cash flow from operations of $11.6 million in the first half of 2011, an increase of 290% year over year.

The acquisition of Clinical Force closed early in the third quarter, adding robust SaaS-based clinical trial management system (CTMS) capabilities to the rich functionality of the Medidata platform.

Medidata won nine new customers globally, including Ardea Biosciences and CRO Veristat.

Customers continue to move to production usage of Medidata’s expanded product portfolio following pilots, including a Top 5 pharma company using Medidata Designer as its protocol development tool and customers in Asia and the U.S using Medidata Balance for randomization and clinical supply management.

One of the largest clinical research organizations (CRO) in Japan joined the Medidata Services Partner program.

Lee Shapiro, president of Allscripts Healthcare Solutions, Inc., joined Medidata’s board of directors.

“We delivered another excellent quarter, highlighting our strong execution, the financial leverage of our business model and our ability to meet customers’ expectations for operational excellence,” said Tarek Sherif, Medidata’s chief executive officer. “The Clinical Force acquisition, combined with internally-driven innovation, have dramatically expanded our SaaS platform, reinforcing our position as the leading solutions provider meeting the rapidly evolving needs of the clinical development industry.”

Financial Review

Net revenues for the second quarter of 2011 were $50.2 million, an increase of $9.9 million, or 25%, compared with $40.3 million in the second quarter of 2010. Application services revenues increased 21%, or $6.9 million, to $39.0 million, while professional services revenues increased 37%. Professional services revenues increased due to a number of factors, including strong demand and the timing of revenue recognition following the company’s adoption of a new GAAP accounting standard at the beginning of 2011.

Net revenues for the quarter include a $3.5 million one-time acceleration of revenue recognition related to two large customer renewals which was not included in guidance. Of the $3.5 million, $2.3 and $1.2 million related to professional services and application services revenue, respectively. Excluding the accounting impact of these two large renewals, net revenues for the quarter were $46.7 million, an increase of $6.3 million, or 16% year on year.

Operating income and net income figures also include approximately $1 million in additional commissions and fees associated with the acceleration of revenues and the Clinical Force acquisition, which were not included in guidance.

Gross margins in the second quarter of 2011 were 73%, an increase of almost 5 percentage points over gross margins of 68% a year ago. Excluding a $3.5 million acceleration of revenue recognition related to two large customer renewals, gross margins were 71%, achieving the company’s previously stated long term target range.

Income before taxes increased to $10.7 million in the second quarter of 2011, compared with $4.6 million in the second quarter of 2010.

Non-GAAP operating income* for the second quarter of 2011 increased 81% to $15.0 million, compared with $8.3 million a year ago. GAAP operating income for the quarter increased 143% to $10.7 million, compared with $4.4 million a year ago.

Non-GAAP net income for the second quarter of 2011 increased to $12.6 million, or $0.51 per diluted share, compared with $5.0 million, or $0.21 per diluted share, in the second quarter of 2010. GAAP net income for the second quarter of 2011 increased to $10.0 million, or $0.40 per diluted share, compared with $3.0 million, or $0.13 per diluted share, in the second quarter of 2010.

Total cash, cash equivalents and marketable securities were $94.2 million at the end of the second quarter, an increase of $3.1 million from the first quarter, and compares to $86.2 million at the end of the second quarter 2010 and $85.5 million at the end of the fourth quarter 2010. On a year to date basis, cash flow from operations at the end of the second quarter was $12 million, an increase of $6 million in the quarter and $8.6 million over the same period last year. The increase was driven by the company’s improving profitability and changes in working capital. Total remaining backlog for the year was $74 million as of June 30, 2011.

Financial Outlook

For the full year 2011, the company expects revenues to be between $182 and $186 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.

For the third quarter of 2011, the company expects revenues to be between $45 and $46 million. The company expects non-GAAP operating income to be between $10 and $11 million. Based on current estimates this would equate to GAAP operating income of $5.5 and $6.5 million. Non-GAAP net income is expected to be between $8 and $9 million. Based on current estimates, this would equate to GAAP net income of between $5 and $6 million.

While changes in the stock price could change the fully diluted share count, the company is assuming 24.9 million fully diluted shares in the third quarter and full year.

Bruce Dalziel, chief financial officer, noted, “This was another strong, steady quarter of growth for Medidata. We are helping customers drive faster decision making, speed time to market and lower their total cost of clinical development, and this resonates deeply with our client base and fuels our growth.”

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, August 23, 2011 by dialing 855-859-2056 domestically or 404-537-3406 internationally, with the passcode 86844695. 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 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, 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:
Melissa Zipin
Lois Paul & Partners
781.782.5726
Melissa_Zipin@lpp.com