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Medidata (MDSO) Q1 Earnings Beat Estimates, Margins fall

Zacks Equity Research

Medidata Solutions, Inc. MDSO reported first-quarter 2019 adjusted earnings per share of 45 cents, which surpassed the Zacks Consensus Estimate by 28.6%. The bottom line increased 12.5% from the year-ago figure.

Revenues of $173.5 million rose 16% year over year. The figure also beat the Zacks Consensus Estimate by 0.9%.

Segment Details

Medidata reports through two major segments, Subscription and Professional ServicesSubscription revenues in the first quarter were $146.9 million, up 16% on a year-over-year basis.

Medidata Solutions, Inc. Price, Consensus and EPS Surprise


Medidata Solutions, Inc. Price, Consensus and EPS Surprise

Medidata Solutions, Inc. price-consensus-eps-surprise-chart | Medidata Solutions, Inc. Quote

Revenues at Professional services grossed $26.6 million, up 19% from the prior-year quarter.


In the first quarter, gross profit was $127.5 million, up 12.9% year over year. Though the gross margin was an impressive 73.5%, it contracted 220 basis points (bps). 

Operating income in the first quarter was $49.8 million, down 62.6% year over year. Operating margin in the quarter was 2.9%, marking a contraction of 600 bps.

Liquidity Position

The company exited the first quarter of 2019 with cash and cash equivalents of $109.1 million, up 3.4% from $105.4 million at the end of 2018.

Wrapping Up

Medidata ended the first quarter of 2019 on a solid note as earnings and revenues outpaced the Zacks Consensus Estimate. It registered double-digit year-over-year revenue growth across both operating segments. Focus on cloud-based services is worth a mention. In fact, the company’s Medidata Cloud has witnessed developments in recent times.

Management remains optimistic about the SHYFT buyout. The launch of the Acorn AI, a company designed to provide actionable insights by breaking data silos and improving data agility across the entire life science continuum, buoys optimism for Medidata. We are upbeat to note that the company secured a competitive win with a top medical device company that will use Rave EDC, CTMS and eTMF to standardize operations and increase efficiency across business units.

On the negative side, Medidata’s declining gross and operating margins raise concern. The company’s overdependence on third parties may also be a concern over the long haul. Medidata’s cloud-based platform may lead to complexities, driving correctional costs. Stiff competition in the niche space adds to concerns.

Zacks Rank

Medidata currently carries a Zacks Rank #3 (Hold).

Earnings of MedTech Majors at a Glance

Some better-ranked stocks, which posted solid results this earnings season, are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the consensus estimate.

Abbott reported first-quarter 2019 adjusted EPS of 63 cents, surpassing the Zacks Consensus Estimate by 3.3%. Worldwide sales were $7.54 billion, outpacing the consensus estimate of $7.47 billion.

CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which surpassed the Zacks Consensus Estimate of 54 cents. Revenues summed $218.4 million, outpacing the consensus mark of $213 million.

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