Medidata third quarter revenues increase 13% to $46.3 million

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 third quarter 2011, as well as provided financial guidance for the fourth quarter and full year 2011.

"Medidata's strong Q3 and record year to date results reflect the unique business value that our SaaS-based product portfolio brings to the clinical development process," said Tarek Sherif, Medidata's chief executive officer. "Our role as a leading supplier of critical infrastructure and business analytics to the global life sciences and CRO sectors is driving increased revenues, profits and market share. We are operating in healthy and vibrant markets, with significant opportunities for growth, and are very well positioned for continued success in the coming year."

Third Quarter Highlights

• Revenues increased to $46.3 million, up 13% year on year.
• Gross margins were 71%, up 3% year on year, and above the company's previously stated long-term target range.
• GAAP and Non-GAAP operating income increased 25% and 18% year on year, to $7.6 and $11.9 million, respectively.
• Year to date GAAP and Non-GAAP operating income increased 62% and 36%, to a record $21.8 and $34.1 million, respectively.
• Year to date GAAP and Non-GAAP operating margins increased to a record 16% and 25%, respectively.
• Cash flow from operations increased 256% year to date to a record $26.3 million.
• Medidata added 33 new customers, including 18 from Clinical Force, for a quarter-end total of 261.
• Customers continued to contract for additional products from Medidata's expanded portfolio, with over 10% of Medidata's customer base buying additional products this quarter.
• A global pharmaceutical company and one of Medidata's top 4 customers extended its multi-year enterprise agreement with Medidata this quarter, continuing its long-time use of Rave, and expanded its use of Medidata's capabilities to include several non-Rave offerings, including Balance, Coder, TSDV and Safety Gateway.
• One of China's largest CROs, Hangzhou Tigermed Consulting Ltd., became a Medidata Services Partner. Clinical Financial Services (CFS), which offers comprehensive business and financial management services for clinical trials, joined the Medidata Technology Partner program.
• Medidata launched Medidata Coder, an easy-to-use, easy-to-maintain software-as-a-service (SaaS) solution that provides a centralized coding environment designed to reduce coding cycle times.

Sherif added, "The integration of the previously announced acquisition of Clinical Force into our company is progressing well. We are working with existing CTMS customers to ensure a smooth transition and are focused on developing a world class CTMS SaaS offering that will benefit Medidata's global customers and partners."

Financial Highlights

Net revenues for the third quarter of 2011 were $46.3 million, an increase of $5.2 million, or 13%, compared with $41.1 million in the third quarter of 2010. The increase in revenues was due to a $1.4 million, or 4%, increase in revenues from application services, and a $3.8 million increase in revenues from professional services.

Gross margins in the third quarter of 2011 were 71%, an increase of approximately 3 percentage points over gross margins of 68% a year ago.

Non-GAAP operating income for the third quarter of 2011 increased 18% to $11.9 million, compared with $10.1 million a year ago. GAAP operating income for the quarter increased 25% to $7.6 million, compared with $6.0 million a year ago.

Non-GAAP net income for the third quarter of 2011 increased to $10.4 million, or $0.42 per diluted share, compared with $6.9 million, or $0.29 per diluted share, in the third quarter of 2010. AAP net income for the third quarter of 2011 increased to $7.5 million, or $0.31 per diluted share, compared with $4.7 million, or $0.20 per diluted share, in the third quarter of 2010.

Cash flow from operations for the third quarter increased to a record $26.3 million, due to the company's improving profitability and changes in working capital.

Financial Outlook

For the full year 2011, the company expects revenues to be between $183 and $185 million. Non-GAAP operating income is expected to be between $44.5 and $45.5 million. Based on current estimates, this would equate to GAAP operating income between $27.5 and $28.5 million. Non-GAAP net income is expected to be between $36.5 and $37.5 million. Based on current estimates, this would equate to GAAP net income between $26.5 and $27.5 million.

Total remaining backlog for 2011 was $39 million at the end of the third 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 revenue from incremental professional services, as well as additional business from new and existing customers.

For the fourth quarter of 2011, the company expects revenues to be between $46.0 and $47.5 million. 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 $8.5 and $9.5 million. Based on current estimates, this would equate to GAAP net income of between $6.0 and $7.0 million.

While changes in the stock price could change the fully diluted share count, the company is assuming 24.5 and 24.7 million fully diluted shares in the fourth quarter and full year, respectively.

"We witnessed solid margin expansion and record cash flow this quarter," said Cory Douglas, chief financial officer. "The scalability of our growing SaaS-based clinical development platform and the long term leverage in our business model are driving our profitable growth."