Medidata Solutions (MDSO) Misses Q3 EPS by 10c, Miss on Revenues; Reaffirms FY17 Guidance

Medidata Solutions (NASDAQ: MDSO) reported Q3 EPS of $0.21, $0.10 worse than the analyst estimate of $0.31. Revenue for the quarter came in at $140.1 million versus the consensus estimate of $141.4 million.

Financial Outlook

We are not changing our financial guidance for full year 2017 as we continue to expect results to be within the previously stated ranges issued at the beginning of the year. The previously issued revenue and profitability guidance ranges for full-year 2017 were as follows:

• Total revenue between $538 and $562 million.
• Professional services revenue is expected to be in the low $80 million dollar range. This reflects strong demand across many customers implementing the platform, data analytics, and strategic services.
• GAAP operating income between $61 and $69 million. Non-GAAP operating income6, which excludes the impact of depreciation, amortization of intangible assets, and stock-based compensation expense, between $131 and $139 million.
• GAAP net income between $31 and $36 million. Adjusted non-GAAP net income6, which excludes the impact of stock-based compensation, non-cash interest expense associated with convertible senior notes, and amortization, tax-effected at a 40% rate, between $69 and $74 million.
• While changes in the stock price could change the fully diluted share count, Medidata is assuming 59.5 million fully diluted shares.

GUIDANCE:

Medidata Solutions sees FY2017 revenue of $538-562 million, versus the consensus of $553.55 million.

Third Quarter 2017 Results

• Total revenue for the third quarter of 2017 was $140.1 million, an increase of $20.0 million, or 17%, compared with $120.1 million in the third quarter of 2016. Subscription revenue was $118.4 million, an increase of $16.9 million, or 17%, compared with the same period last year.
• Professional services revenue for the third quarter of 2017 was $21.7 million, an increase of $3.2 million, or 17%, compared with $18.5 million in the third quarter of 2016.
• GAAP gross margin for the third quarter of 2017 was 77.5%, up 180 basis points compared with 75.7% in the third quarter of 2016.
• GAAP operating income1 for the quarter was $22.0 million, up 47% compared with $14.9 million in the third quarter of 2016. Non-GAAP operating income2 for the third quarter of 2017 increased to $36.2 million, up 23% compared with $29.3 million a year ago.
• GAAP operating income margin1 was 15.7% in the third quarter of 2017, up 330 basis points compared with 12.4% in the third quarter of 2016. Non-GAAP operating income margin2 was 25.8% in the third quarter of 2017, up 140 basis points compared with 24.4% in the third quarter of 2016.
• GAAP net income1 for the third quarter of 2017 was $12.8 million, or $0.21 per diluted share, up 75% compared with $7.4 million, or $0.13 per diluted share, in the third quarter of 2016. Adjusted non-GAAP net income2 for the third quarter of 2017 was $20.2 million, or $0.33 per diluted share, up 26% compared with $16.0 million, or $0.28 per diluted share, in the third quarter of 2016. See the non-GAAP reconciliation included in this release for full details of the non-GAAP adjustments.
• For the third quarter of 2017, GAAP income1 includes a pre-tax benefit of $4.8 million related to the probable insurance recovery of the previously recognized 2014 wire transaction loss as a result of a recent favorable district court ruling.
• Cash flow from operations was $30.9 million in the third quarter of 2017, an increase of $25.6 million, or 480%, compared with $5.3 million a year ago. For the nine-month period ending September 30, cash flow from operations was $91.6 million in 2017, an increase of $43.2 million, or 89%, compared with $48.4 million in 2016.
• Total cash, cash equivalents, and marketable securities were $553.6 million at the end of the third quarter, compared with $515.2 million on December 31, 2016.

For earnings history and earnings-related data on Medidata Solutions (MDSO) click here.

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