Medidata Reports Second Quarter 2019 Results

Medidata (NASDAQ:MDSO) today announced its financial results for the second quarter of 2019.

"Our good results in the second quarter and for the first half of the year were driven by the strength of our core business,” said Tarek Sherif, chairman and CEO, Medidata. "With our win rate at an all-time high, we continue to gain market share with over 1,300 customers now relying on our platform to power their mission critical drug development activities and accelerate innovation. Acorn AI is off to a fast start, creating significant value for our customers and further differentiating us as the platform of choice for life sciences.

"This quarter we celebrated the 20th anniversary of Medidata, and our 10th as a public company. I am incredibly proud of what we’ve accomplished and the value we have created over the past two decades--most importantly, I’m proud of the impact we are having on patients’ lives. As I think about the next decade, I am excited about the potential that lies ahead for Medidata, our industry and patients, as we move forward in partnership with Dassault Systèmes.”

Second Quarter 2019 Results

• Total revenue was $180.5 million, an increase of 16% compared with $155.9 million in the second quarter of 2018
• Subscription revenue was $150.0 million, an increase of 15% compared with the second quarter of 2018. Professional services revenue was $30.5 million, an increase of 20% compared with the second quarter of 2018
• GAAP operating income was $1.9 million and non-GAAP operating income¹, which excludes $5.1 million of merger-related expenses incurred during the quarter, was $41.3 million, representing GAAP and non-GAAP operating margins of 1.1% and 22.9%, respectively
• GAAP net income was $7.9 million, or $0.13 per diluted share, compared with $16.6 million, or $0.27 per diluted share, in the second quarter of 2018. This includes an income tax benefit of $6.1 million related to excess tax benefits from stock-based compensation
• Non-GAAP net income¹, which excludes the aforementioned merger-related expenses, was $30.1 million, or $0.48 per diluted share, compared with $26.4 million, or $0.43 per diluted share, in the second 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 $206.0 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 June 30, 2019 was $301 million, an increase of $38 million, or 14%, compared with a year ago
• Total multi-year unadjusted subscription backlog was $1.1B, an increase of 6% from a year ago
• Operating cash flow for the trailing 12 months was $96 million, up 13% from a year ago
• Total customers grew to 1,330, an increase of 23% from a year ago
• Medidata Institute was launched to collaborate with industry thought leaders, redefining technology’s role in advancing science and healthcare
• Medidata received a Gold Stevie® at the 2019 American Business Awards® for the company’s corporate social responsibility program
• Everest Group’s 2019 Life Sciences Clinical Trials Products PEAK Matrix™ recognized Medidata as both a leader and star performer
• IDC’s report (Worldwide Life Science Software Market Shares, 2018), named Medidata as the global leader in Life Science Development Software Revenue. The report cited that Medidata has continued to strengthen its position as the leading vendor in life science development
• Revenue retention rate³ was nearly 100% for the quarter

"In the second quarter, we delivered solid top-line growth of 16% and operating cash flow growth of 29%. I am pleased with the scale in our core business. Consistent with our long-term strategy, we continue to invest in our core Rave applications, scaling our platform, and capturing the value of our data with AI,” said Rouven Bergmann, chief financial officer, Medidata. "While we are no longer providing financial guidance, we remain focused on executing in the second half of the year via our established growth drivers of density, intensity and new customer additions.”

Conference call and earnings guidance

Due to the company's pending acquisition by Dassault Systèmes, it will not host a conference call to discuss its results. Additionally, the company will no longer provide financial guidance.

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 1,300 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, risks related to our pending merger with a subsidiary of Dassault Systèmes, 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.

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