As we witness numerous businesses moving on to the Cloud bandwagon, various software companies that provide SaaS applications on the cloud foresee a brighter future. Medidata solutions (MDSO, Financial) is one such company which is focused on cloud-enabled software solutions as SaaS applications. It is an industry leader in providing SaaS application for clinical development software solutions and has been performing well as a result of the booming cloud technology. It maintains a strong client list from diverse backgrounds like Bio-Tech, Medical Instrumentations devices manufacturers, government departments and academics.
The company recently declared financial results for the Q2 2014. It was impressive to see that its revenues grew as compared to previous quarters.
Solid performance
Medidata has been performing as per the expectation of investors and registering an organic growth in recent quarters. In Q2 2014 it recorded revenue of $83.2 million; this is 22% higher as compared to last year same quarter that recorded $68.1 million. Major contribution to the revenue (82%) came from subscription-based services. It was up by 22% year over year, to a record $68.9 million.
The company’s customer base has been constantly increasing in the past. In the current quarter it added 30 new customers, 50% higher than the same quarter last year. The company now records 437 customers. The increasing number of customers will always have a positive impact on the subscription revenue for the company. Since MediData, provides solutions on a SaaS business model, the increasing number of customers will leverage a sustained growth of the top and bottom lines in future.
Journey ahead
Medidata has been consistently identifying customers' needs and has been enhancing its services by implementing new features in its existing Cloud applications to improve revenue. The cloud model for clinical software is now more efficient in deployment, which can result in considerable cost savings for end customers. With these benefits, it should be able to bring in new customers and get more business from the existing ones.
Its new product release, Medidata Insight, will help it in acquiring new customers since it is the first of its kind quality management solution for industry specific solutions. This further broadens the portfolio of solutions offered by the company.
Its policy of staying focused in the area of clinical development software on leading platforms can be undeniably advantageous for its growth in the future. Adapting to the changing environment and technology with time has been the reason behind the success of Medidata. Enabling Cloud-based solutions as SAAS applications has rewarded Medidata with revenue growth and its ever-expanding services should ensure the same.
Competitors in similar segment
Tableau Software (DATA, Financial)Â is a company that is also focusing on Cloud-based solutions. It is primarily involved in business intelligence and is partnering with various companies for growth. It has partnered with 1010data with the main objective of providing its customers access to it applications on the 1010data Cloud server network for enhancing the performance of the reporting system. The company believes that this partnership will help it to meet its customers’ needs who will be able to analyze critical business trends and patterns spanning billions of transactions, and present results in a matter of minutes.
Oracle (ORCL, Financial) is a leader in the software industry, and the company's recent release of Oracle 12c and a new version of "Oracle Enterprise Manager 12c," which assists in implementing mission-critical applications on private Cloud, make its portfolio even stronger. These applications reduce 90% of the downtime and result in 75% productivity increase apart from 20% savings in server cost.
Even Oracle has benefited from partnerships with companies like Microsoft (MSFT, Financial), NetSuite (N, Financial) and Salesforce.com (CRM) that have benefited its Cloud and Java users. So important partnerships are the way to go in cloud computing and even Oracle is following the same path.
Conclusion
Medidata has performed very well so far and with its new solutions the bull case is strengthened further. Considering the growth of cloud computing and Medidata's specialization in clinical development should ensure growth in the future. The stock is expensive with a trailing P/E ratio (ttm) of 201, but the company is expected to grow earnings at a CAGR of 22% in the next five years which makes it worth the premium.
