Medidata
(NASDAQ: MDSO) today announced its financial results for the first
quarter of 2019.
“Medidata is at the forefront of driving the digital transformation of
life science with our platform, data assets and industry expertise,
helping fulfill the mission we set almost 20 years ago to positively
impact patients’ lives,” said Tarek Sherif, chairman and chief executive
officer, Medidata. “While we achieved solid results this quarter,
importantly we have laid the foundation for the future with the launch
of Acorn AI.”
First Quarter 2019 Results
-
Total revenue was $173.5 million, an increase of 16% compared with
$149.2 million in the first quarter of 2018 -
Subscription revenue was $146.9 million, an increase of 16% compared
with the first quarter of 2018. Professional services revenue was
$26.6 million, an increase of 19% compared with the first quarter of
2018 -
GAAP operating income was $5.0 million and non-GAAP operating income1
was $35.9 million, representing a GAAP and non-GAAP operating margin
of 2.9% and 20.7%, respectively -
GAAP net income was $11.1 million, or $0.18 per diluted share,
compared with $10.3 million, or $0.17 per diluted share, in the first
quarter of 2018. Non-GAAP net income1 was $27.9 million, or
$0.45 per diluted share, compared with $24.0 million, or $0.40 per
diluted share, in the first quarter of 2018. See the non-GAAP
reconciliation included in this release for full details of the
non-GAAP adjustments -
Total cash and marketable securities were $206.1 million at the end of
the quarter, compared with $240.5 million on December 31, 2018
Additional Highlights:
-
Remaining 2019 adjusted subscription backlog2 as of March
31, 2019 was $432 million, an increase of $62 million, or 17%,
compared with a year ago -
Launched Acorn AI™, a company designed to provide actionable insights
by breaking data silos and improving data agility across the entire
life science continuum -
Appointed the company’s first-ever Chief Information Officer, Dr. Rama
Kondru, an industry visionary and former CIO of Janssen Americas.
Additionally, Dr. Rachel Sherman, former principal deputy commissioner
of FDA, joined Acorn AI as chief scientific and medical advisor -
In collaboration with the FDA Center for Drug Evaluation and Research
(CDER), Medidata will apply a Synthetic Control Arm™ approach to adult
historical clinical trial data and extrapolate results to children.
The aim is to minimize exposure of children to clinical trials and
increase the speed and efficiency of pediatric drug development -
Secured a competitive win with a top 10 medical device company that
will use Rave EDC, CTMS and eTMF to standardize operations and
increase efficiency across business units - Revenue retention rate3 was nearly 100% for the quarter
“We had a good start to the year with 16% total revenue growth,” said
Rouven Bergmann, chief financial officer, Medidata. “With a rock-solid
core business, combined with the launch of Acorn AI, we are well
positioned for future growth while we focus on expanding our operating
margins.”
Conference call details:
| Time: | Today, April 30, 8 a.m. ET | |
| Conference ID: | 9260289 | |
| Live dial-in: | 1-877-791-0148, domestic | |
| 1-647-689-5652, international | ||
| Webcast: | investors.medidata.com | |
| Replay: | 1-800-585-8367, domestic | |
| 1-416-621-4642, international | ||
About Medidata
Medidata is leading the digital transformation of life sciences, with
the world’s most-used platform for clinical development, commercial, and
real-world data. Powered by artificial intelligence and delivered by
industry experts, Medidata helps pharmaceutical, biotech, medical device
companies, and academic researchers accelerate value, minimize risk and
optimize outcomes. Medidata and its companies, Acorn AI and SHYFT, serve
more than 1,200 customers and partners worldwide and empower more than
150,000 certified users every day to create hope for millions of
patients. Discover the future of life sciences: www.medidata.com
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. Among
other things, the risks and uncertainties include those associated with
possible fluctuations in our financial and operating results;
integration activities, performance and financial impact of acquired
companies; our ability to retain and expand our customer base or
increase new business from those customers; and our ability to continue
to release, and gain customer acceptance of, new and improved versions
of our products. For additional disclosure regarding these and other
risks faced by Medidata, 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, 2018. 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, new developments
or otherwise, except as required by law.
(1) Non-GAAP Financial Information
Medidata provides non-GAAP operating income, net income, and net
income per share data as a supplement to its operating results. These
measures are not in accordance with, or an alternative to, generally
accepted accounting principles (GAAP), and may be different from
non-GAAP measures used by other companies. 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, management believes, based on discussions
with investors, that these non-GAAP measures enhance investors’ ability
to assess Medidata’s historical and projected future financial
performance. While management believes these non-GAAP financial measures
provide useful supplemental information to investors, there are inherent
limitations associated with the use of non-GAAP financial measures.
Investors are encouraged to review the attached reconciliations of these
non-GAAP financial measures to the nearest comparable GAAP measures.
(2) Adjusted subscription backlog equals subscription backlog plus
outstanding intra-year renewals valued at an amount equal to the
contracts to be renewed.
(3) Revenue retention rate is calculated as the percentage of prior year
revenue attributable to customers retained in the current year.
| MEDIDATA SOLUTIONS, INC. | ||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||
| (Amounts in thousands, except per share data) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Revenues | ||||||||||
| Subscription | $ | 146,875 | $ | 126,819 | ||||||
| Professional services | 26,629 | 22,379 | ||||||||
| Total revenues | 173,504 | 149,198 | ||||||||
| Cost of revenues (1)(2) | ||||||||||
| Subscription | 26,728 | 20,341 | ||||||||
| Professional services | 19,275 | 15,961 | ||||||||
| Total cost of revenues | 46,003 | 36,302 | ||||||||
| Gross profit | 127,501 | 112,896 | ||||||||
| Operating costs and expenses | ||||||||||
| Research and development (1) | 46,489 | 37,522 | ||||||||
| Sales and marketing (1)(2) | 43,396 | 36,861 | ||||||||
| General and administrative (1) | 32,634 | 25,187 | ||||||||
| Total operating costs and expenses | 122,519 | 99,570 | ||||||||
| Operating income | 4,982 | 13,326 | ||||||||
| Interest and other income (expense) | ||||||||||
| Interest expense | (1,110 | ) | (5,575 | ) | ||||||
| Interest income | 945 | 2,088 | ||||||||
| Other expense, net | (28 | ) | (96 | ) | ||||||
| Total interest and other expense, net | (193 | ) | (3,583 | ) | ||||||
| Income before income taxes | 4,789 | 9,743 | ||||||||
| Provision for income taxes | (6,356 | ) | (582 | ) | ||||||
| Net income | $ | 11,145 | $ | 10,325 | ||||||
| Earnings per share | ||||||||||
| Basic | $ | 0.19 | $ | 0.18 | ||||||
| Diluted | $ | 0.18 | $ | 0.17 | ||||||
| Weighted average common shares outstanding | ||||||||||
| Basic | 59,693 | 57,055 | ||||||||
| Diluted | 61,755 | 60,098 | ||||||||
|
(1) Stock-based compensation expense included in cost of revenues and operating costs and expenses is as follows: |
||||||||||
| Cost of revenues | $ | 2,383 | $ | 1,268 | ||||||
| Research and development | 4,249 | 2,854 | ||||||||
| Sales and marketing | 5,426 | 2,644 | ||||||||
| General and administrative | 7,606 | 6,389 | ||||||||
| Total stock-based compensation | $ | 19,664 | $ | 13,155 | ||||||
|
(2) Amortization of intangible assets included in costs of revenues and operating costs and expenses is as follows: |
||||||||||
| Cost of revenues | $ | 1,364 | $ | 1,094 | ||||||
| Sales and marketing | 506 | 120 | ||||||||
| Total amortization of intangible assets | $ | 1,870 | $ | 1,214 | ||||||
| MEDIDATA SOLUTIONS, INC. | ||||||||||
|
Reconciliation of GAAP Operating Income and GAAP Net Income to
Non-GAAP Operating Income and Non-GAAP Net Income (Unaudited) |
||||||||||
| (Amounts in thousands, except per share data) | ||||||||||
|
Three Months Ended March 31, |
||||||||||
| 2019 | 2018 | |||||||||
| Operating income: | ||||||||||
| GAAP operating income | $ | 4,982 | $ | 13,326 | ||||||
| GAAP operating margins | 2.9 | % | 8.9 | % | ||||||
| Stock-based compensation | 19,664 | 13,155 | ||||||||
| Depreciation and amortization | 10,529 | 7,813 | ||||||||
| Contingent consideration adjustments (1) | 161 | (72 | ) | |||||||
| Cash compensation from acquisition-related agreements (2) | 590 | — | ||||||||
| Non-GAAP operating income | $ | 35,926 | $ | 34,222 | ||||||
| Non-GAAP operating margins | 20.7 | % | 22.9 | % | ||||||
| Net income: | ||||||||||
| GAAP net income | $ | 11,145 | $ | 10,325 | ||||||
| Stock-based compensation | 19,664 | 13,155 | ||||||||
| Amortization | 1,870 | 1,214 | ||||||||
| Contingent consideration adjustments (1) | 161 | (72 | ) | |||||||
| Cash compensation from acquisition-related agreements (2) | 590 | — | ||||||||
| Non-cash interest expense (3) | 109 | 3,908 | ||||||||
| Tax impact on add-back items (4) | (5,599 | ) | (4,551 | ) | ||||||
| Non-GAAP net income | $ | 27,940 | $ | 23,979 | ||||||
| GAAP basic earnings per share | $ | 0.19 | $ | 0.18 | ||||||
| GAAP diluted earnings per share | $ | 0.18 | $ | 0.17 | ||||||
| Non-GAAP basic earnings per share | $ | 0.47 | $ | 0.42 | ||||||
| Non-GAAP diluted earnings per share | $ | 0.45 | $ | 0.40 | ||||||
|
(1) Change in fair value of acquisition-related contingent consideration liability. |
|
(2) Expense associated with acquisition-related cash compensation agreements entered into with certain employees of SHYFT Analytics, Inc. (“SHYFT”). |
|
(3) Non-cash interest expense for the three months ended March 31, 2019 and 2018 includes amortization of issuance costs of our credit agreement entered into in 2017. Non-cash interest expense for the three months ended March 31, 2018 also includes amortization of debt discount and issuance costs on our 1.00% convertible senior notes issued in 2013 and settled in August 2018. We exclude this incremental non-cash interest expense for purposes of calculating non-GAAP net income. We believe that excluding these expenses from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not generate a cash outflow, nor do the debt issuance costs represent a cash outflow except in the period of issuance; therefore both are not indicative of our continuing operations. |
| (4) Tax impact calculated using a 25% rate. |
|
The table above presents a reconciliation of GAAP to non-GAAP |
| MEDIDATA SOLUTIONS, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||||
| (Amounts in thousands, except per share data) | ||||||||||
|
March 31, 2019 |
December 31, |
|||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 109,052 | $ | 105,440 | ||||||
| Marketable securities | 97,060 | 135,105 | ||||||||
|
Accounts receivable, net of allowance for doubtful accounts of $1,959 and $1,999, respectively (1) |
177,853 | 170,744 | ||||||||
| Capitalized contract costs | 23,186 | 22,247 | ||||||||
| Prepaid expenses and other current assets | 36,817 | 28,949 | ||||||||
| Total current assets | 443,968 | 462,485 | ||||||||
| Restricted cash | 7,212 | 7,205 | ||||||||
| Operating lease assets (2) | 86,383 | — | ||||||||
| Furniture, fixtures and equipment, net | 111,035 | 98,983 | ||||||||
| Goodwill | 215,958 | 216,017 | ||||||||
| Intangible assets, net | 28,276 | 29,546 | ||||||||
| Deferred tax assets | 46,503 | 45,982 | ||||||||
| Other assets | 57,367 | 52,994 | ||||||||
| Total assets | $ | 996,702 | $ | 913,212 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 8,137 | $ | 7,482 | ||||||
| Accrued payroll and other compensation | 31,823 | 51,270 | ||||||||
| Accrued expenses and other | 46,785 | 37,487 | ||||||||
| Operating lease liabilities (2) | 14,286 | — | ||||||||
| Deferred revenue | 71,591 | 74,463 | ||||||||
| Total current liabilities | 172,622 | 170,702 | ||||||||
| Noncurrent liabilities: | ||||||||||
| Term loan, net | 86,606 | 88,366 | ||||||||
| Deferred revenue, noncurrent | 2,424 | 3,843 | ||||||||
| Deferred tax liabilities | 98 | 99 | ||||||||
| Operating lease liabilities, noncurrent (2) | 96,585 | — | ||||||||
| Other long-term liabilities | 1,641 | 18,754 | ||||||||
| Total noncurrent liabilities | 187,354 | 111,062 | ||||||||
| Total liabilities | 359,976 | 281,764 | ||||||||
| 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; 200,000 shares authorized; 67,434 and 66,103 shares issued; 62,246 and 61,348 shares outstanding, respectively |
674 | 661 | ||||||||
| Additional paid-in capital | 596,725 | 574,667 | ||||||||
| Treasury stock, 5,188 and 4,755 shares, respectively | (181,553 | ) | (152,849 | ) | ||||||
| Accumulated other comprehensive loss | (4,103 | ) | (4,869 | ) | ||||||
| Retained earnings | 224,983 | 213,838 | ||||||||
| Total stockholders’ equity | 636,726 | 631,448 | ||||||||
| Total liabilities and stockholders’ equity | $ | 996,702 | $ | 913,212 | ||||||
|
(1) Unbilled receivables of $48,648 and $38,601, respectively, are included in accounts receivable as of March 31, 2019 and December 31, 2018. |
|
(2) Figures as of March 31, 2019 reflect the Company’s January 1, 2019 adoption of Accounting Standards Update (“ASU”) No. 2016-02, Leases. |
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