Medidata Reports Record Third Quarter 2016 Results
Record revenues of $120.1 million, a 5% sequential increase
Quarterly subscription revenue tops $100 million for the first time totaling $101.6 million
GAAP net income of $7.4 million, or $0.13 per diluted share, a 57% year-over-year increase
Reaffirms full-year 2016 total revenue and profitability guidance with 98% adjusted backlog coverage
NEW YORK, N.Y. – October 25, 2016 – Medidata (NASDAQ: MDSO), the leading global provider of cloud-based solutions for clinical research in life sciences, today announced its financial results for the third quarter of 2016.
“We had a great third quarter, as execution drove our strong financial performance, improved platform adoption and broad-based momentum across our products, regions and channels,” said Tarek Sherif, Medidata’s chairman and chief executive officer. “Our results show that our investments in innovation and commitment to customer and partner success are paying off. With the life sciences industry increasingly turning to Medidata to help support its transformation, we are positioned to be the architecture supporting drug development today and in the future. For the remainder of the year, we’re focused on executing on our 2016 plan and building the foundation for a strong 2017.”
Third Quarter 2016 Results
Total revenue for the third quarter of 2016 was $120.1 million, an increase of $16.9 million, or 16%, compared with $103.1 million in the third quarter of 2015. Subscription revenue was $101.6 million, an increase of $12.7 million, or 14%, compared with the same period last year.
Professional services revenue for the third quarter of 2016 was $18.5 million, an increase of $4.3 million, or 30%, compared with $14.2 million in the third quarter of 2015.
Adjusted subscription backlog1 for the remainder of the year as of September 30, 2016 was $102 million, an increase of $19 million, or 23%, year-over-year. Remaining adjusted subscription backlog, together with remaining professional services revenue guidance, provides 98% coverage of remaining total revenue based on the midpoint of our full year 2016 total revenue guidance range.
GAAP operating income for the quarter was $14.9 million, up 34%, compared with $11.1 million in the third quarter of 2015. Non-GAAP operating income2 for the third quarter of 2016 increased to $29.3 million, up 13%, compared with $26.0 million a year ago.
GAAP net income for the third quarter of 2016 was $7.4 million, or $0.13 per diluted share, up 57%, compared with $4.7 million, or $0.08 per diluted share, in the third quarter of 2015. Adjusted non-GAAP net income2 for the third quarter of 2016 was $16.0 million, or $0.28 per diluted share, up 14%, compared with $14.0 million, or $0.25 per diluted share, in the third quarter of 2015. See the non-GAAP reconciliation included in this release for full details of the non-GAAP adjustments.
Calculated billings3 were $121.3 million for the third quarter of 2016, up 29%, compared with $93.9 million in the third quarter of 2015.
Cash flow from operations was $5.3 million in the third quarter of 2016 compared with $25.7 million a year ago, due to the timing of certain customer receivables, the majority of which were collected in October. Cash flow from operations was $78.8 million for the trailing twelve-month period ending September 30, 2016, an increase of $1.2 million, or 2%, compared with $77.6 million for the comparable period ending September 30, 2015.
Total cash, cash equivalents and marketable securities were $484.2 million at the end of the third quarter of 2016, an increase of $5.5 million, or 1%, compared with $478.7 million on December 31, 2015.
Medidata’s customer base grew to 789 at the end of the third quarter, up 38% year-over-year.
71% of clients had committed to multiple products at the end of the third quarter of 2016, up from 65% at the end of the third quarter of 2015.
Product adoption was broad-based across our integrated platform, with particular strength in Medidata Rave®, Medidata Coder®, Image Management, Risk-Based Monitoring, Medidata Balance®, Medidata CTMS® and Medidata Patient Cloud®.
Medidata’s revenue retention rate was nearly 100%.
“Building on our strong first half of 2016, third quarter and year-to-date results reflect continued solid execution and growth across all segments of our business,” said Rouven Bergmann, Medidata’s chief financial officer. "Our strategy is working as we continue to drive greater product adoption from new customer acquisitions as well as add-on product sales to existing customers. With 98% coverage of the midpoint of our full-year total revenue guidance, we enter the fourth quarter with strong visibility and confidence in delivering upon our 2016 revenue and profitability expectations."
For the full-year 2016, the Company is maintaining its previously stated total revenue and profitability guidance ranges, as follows:
Total revenue between $450.0 and $474.0 million at constant currency.
Professional services revenue in the range of $68.0 to $70.0 million.
GAAP operating income between $38.5 and $45.5 million. Non-GAAP operating income, which excludes the impact of depreciation, amortization of intangible assets, and stock-based compensation expense, between $102.0 and $109.0 million.
GAAP net income between $16.5 and $21.0 million. Adjusted non-GAAP net income, which excludes the impact of stock-based compensation, non-cash interest expense associated with convertible senior notes, and amortization, tax-affected at a 40% rate, between $54.5 and $59.0 million.
While changes in the stock price could change the fully diluted share count, the Company is now assuming 57.3 million fully diluted shares.
The operating and net income measures above reflect the Company’s non-GAAP financial guidance and the corresponding GAAP equivalents to its guidance.
The Company plans to host its investor conference call today at 8:00 a.m. Eastern time. The investor conference call will be available via live webcast on the “Investor” section of Medidata’s website 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 website at http://investor.mdsol.com. A replay of the conference call can be accessed until Tuesday, November 8, 2016, by dialing 800-585-8367 domestically or 404-537-3406 internationally, with the passcode 91173550. An archive of the call will also be hosted on the “Investor” section of Medidata’s website, http://investor.mdsol.com, for a limited period of time.
Medidata is reinventing global drug development by creating the industry's leading cloud-based solutions for clinical research. Through our advanced applications and intelligent data analytics, Medidata helps advance the scientific goals of life sciences customers worldwide, including more than 700 global pharmaceutical companies, innovative biotech, diagnostic and device firms, leading academic medical centers and contract research organizations.
The Medidata Clinical Cloud® brings a new level of quality and efficiency to clinical trials that empower our customers to make more informed decisions earlier and faster. Our unparalleled clinical trial data assets provide deep insights that pave the way for future growth. The Medidata Clinical Cloud is the primary technology solution powering clinical trials for 17 of the world's top 25 global pharmaceutical companies, from study design and planning through execution, management and reporting.
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, 2015. 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.
(1) Adjusted subscription backlog equals subscription backlog plus outstanding intra-year renewals valued at an amount equal to the contracts to be renewed.
(2) 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, and stock-based compensation expense. Adjusted non-GAAP net income excludes the tax-affected impact of amortization of intangible assets associated with acquisitions, stock-based compensation expense, and non-cash interest expense on convertible senior notes. 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, amortization and other non-cash charges, such as share-based compensation, and 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 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.
(3) Calculated billings is equal to revenue plus the change in deferred revenue during the period.
Click here to download the press release, financial tables and non-GAAP reconciliation.