eResearchTechnology Reports Second Quarter 2008 Results
Q2 2008 Net Revenues - a record $35.5 million vs. $24.7 million in Q2 2007 - an increase of 43.4% Q2 2008 Diluted Net Income per Share - $0.13 vs. $0.08 in Q2 2007 - an increase of 62.5% Q2 2008 Operating Income margin of 30.3% vs. 25.3% in Q2 2007 Q2 2008 New Bookings of $49.0 million vs. $34.5 million in Q2 2007 PHILADELPHIA, Aug. 4 /EMWNews/ -- eResearchTechnology, Inc. (eRT), (Nasdaq: ERES), a leading provider of centralized ECG and eClinical technology, ePRO and other services to the pharmaceutical, biotechnology, medical device and related industries, announced today results for the second quarter and six-month period ended June 30, 2008. Financial highlights for the second quarter of 2008 were: -- Record quarterly net revenues of $35.5 million, a 43.4% increase from the second quarter of 2007; -- Diluted net income per share of $0.13, a 62.5% increase from the second quarter of 2007; -- Gross margin of $20.2 million for a gross margin percentage of 57.0%, a 310 basis point increase from the second quarter of 2007. The gross margin included the impact of the operating results of CCSS and the integration of CCSS into eRT. CCSS generated net revenues of $3.0 million while incurring costs of revenue of $2.4 million; -- Operating income of $10.8 million, a 72.2% increase from the second quarter of 2007. Operating income margin percentage was 30.3%, a 500 basis point increase from the second quarter of 2007. Operating income included a loss of $0.3 million from the operations of CCSS and the integration of CCSS into eRT; -- New bookings of $49.0 million compared to $34.5 million for the second quarter of 2007, an increase of 42.0%; -- New bookings included a record 15 new Thorough ECG study agreements, valued at an average of slightly greater than $900,000 each; -- The backlog was a record $157.9 million, an increase of $6.5 million from March 31, 2008. -- The book-to-bill ratio was 1.4 in the second quarter of 2008, the same as in the second quarter of 2007; and -- eRT ended the second quarter with $55.9 million in cash, cash equivalents and investments, an increase of $7.0 million from $48.9 million at March 31, 2008. For the three months ended June 30, 2008, net cash provided by operating activities was $10.4 million. Other recent highlights: -- eRT appointed Keith Schneck as its new Chief Financial Officer in July 2008; Mr. Schneck has extensive public company experience as the CFO for Neoware, Inc. and Integrated Circuit Systems; -- The cancellation rate was an annualized 18.1% as compared to an annualized cancellation rate of 17.6% in the second quarter of 2007; -- Reflecting our growth, we are moving our corporate headquarters (and US-based core lab) in Philadelphia to a larger facility, also in Philadelphia, by the end of 2008; and -- eRT appointed Michael DeMane to the Board of Directors in July 2008. Mr. DeMane was previously Chief Operating Officer of Medtronic, Inc. and served as Senior Vice President and President Europe, Canada, Latin America and Emerging Markets. Mr. DeMane brings a wealth of international operations and marketing experience to the Board. "We are very pleased with the second quarter results where we saw record quarterly revenue, ECG transactions, backlog and very strong bookings for eRT," commented Dr. Michael McKelvey, President and CEO of eRT. "Our services revenue grew by 55.9%, driven by outstanding growth in our core cardiac safety business. Bookings were strong, especially for Thorough QT studies. In comparison to the first quarter of 2008, margins increased in all three revenue categories -- services, site support, and licenses. Net income was $6.7 million, an increase of 60.9% from $4.1 million for the second quarter of 2007. The second quarter results again demonstrated the leverage in our business model as evidenced by expanding gross margins and net income growth." For the six months ended June 30, 2008, the Company reported revenues of $69.1 million compared to $45.8 million for the six months ended June 30, 2007, an increase of 50.9%. eRT reported net income of $12.4 million, or $0.24 per diluted share, for the six months ended June 30, 2008 compared to net income of $6.4 million, or $0.12 per diluted share, for the six months ended June 30, 2007. The Company's gross margin percentage for the six months ended June 30, 2008 was 54.8% compared to 51.0% for the six months ended June 30, 2007. Operating income margin for the six months ended June 30, 2008 was 27.8% compared to 20.4% for the six months ended June 30, 2007. The Company's tax rate was 37.7% for the six months ended June 30, 2008 compared to 39.0% for the six months ended June 30, 2007. For the six months ended June 30, 2008, cash provided by operating activities was $18.0 million. "We continue to execute very well on our projects. The integration of the CCSS acquisition is approximately 3 months ahead of schedule. We are very fortunate to hire someone of the caliber of Keith Schneck as our new CFO. We believe that he will make a strong impact on our business. Our pipeline of new opportunities is strong, reflecting the continued emphasis on cardiac safety and eRT's reputation for quality, medical and scientific leadership, project execution and technology innovation," continued Dr. McKelvey. "The pricing environment continues to be stable. We continue to see expanded opportunities with all of our CRO key partnerships and Phase I units. While there are many areas in which we need to continue to improve, the first half of the year has been an excellent start to the year." 2008 Guidance The Company issued guidance for the third quarter of 2008 and for the full year 2008. eRT expects to report revenues of between $33.0 million and $35.0 million, reflecting a normal slowdown due to summer vacations which typically reduces study activity, and diluted net income per share of between $0.10 to $0.12 for the third quarter ending September 30, 2008. For the full year 2008, the Company is confirming its previously issued guidance for revenue of between $133.0 million and $140.0 million and increasing the lower end of its guidance for diluted net income per share to between $0.46 to $0.49; previously issued guidance for diluted net income per share was between $0.44 to $0.49. Dr. McKelvey and Keith Schneck, the Company's Chief Financial Officer, will hold a conference call to discuss these results. The conference call will take place at 5:00 p.m. EDT on August 4, 2008. Interested participants should call 800-659-2032 when calling within the United States or 617-614-2712 when calling internationally. Please use pass code 98614709. There will be a playback available until August 11, 2008. To listen to the playback, please call 888-286-8010 when calling within the United States or 617-801-6888 when calling internationally. Please use pass code 80358836 for the replay. This call is being webcast by Thomson Financial and can be accessed at eRT's web site at http://www.eRT.com. The webcast may also be accessed at Thomson's Institutional Investor website at http://phx.corporate-ir.net/playerlink.zhtml?c=119164&s=wm&e=1903663. The webcast can be accessed until August 4, 2009 on either site.
About eResearchTechnology, Inc. Based in Philadelphia, PA, eResearchTechnology, Inc. (http://www.eRT.com) is a provider of technology and services to the pharmaceutical, biotechnology and medical device industries on a global basis. The Company is a market leader in providing centralized core-diagnostic electrocardiographic (ECG) technology and services to evaluate cardiac safety in clinical development. The Company is also a leader in providing technology and services to streamline the clinical trials process by enabling its customers to automate the collection, analysis, and distribution of clinical data in all phases of clinical development. Statements included in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including, but not limited to, 2008 financial guidance, involve a number of risks and uncertainties such as the Company's ability to obtain new contracts and accurately estimate net revenues due to uncertain regulatory guidance, variability in size, scope and duration of projects, and internal issues at the sponsoring client, integration of acquisitions, competitive factors, technological development, and market demand. As a result, actual results may differ materially from any financial outlooks stated herein. Further information on potential factors that could affect the Company's financial results can be found in the Company's Reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
eResearchTechnology, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2007 2008 2007 2008 Net revenues: Licenses $580 $870 $1,362 $1,495 Services 17,561 27,380 31,529 52,653 Site support 6,593 7,222 12,927 14,997 Total net revenues 24,734 35,472 45,818 69,145 Costs of revenues: Cost of licenses 63 170 129 370 Cost of services 7,233 10,483 14,023 20,997 Cost of site support 4,117 4,599 8,312 9,867 Total costs of revenues 11,413 15,252 22,464 31,234 Gross margin 13,321 20,220 23,354 37,911 Operating expenses: Selling and marketing 3,054 3,810 5,592 7,133 General and administrative 2,919 4,601 6,388 9,474 Research and development 1,102 1,051 2,027 2,050 Total operating expenses 7,075 9,462 14,007 18,657 Operating income 6,246 10,758 9,347 19,254 Other income, net 569 244 1,119 671 Income before income taxes 6,815 11,002 10,466 19,925 Income tax provision 2,676 4,342 4,079 7,519 Net income $4,139 $6,660 $6,387 $12,406 Basic net income per share $0.08 $0.13 $0.13 $0.24 Diluted net income per share $0.08 $0.13 $0.12 $0.24 Shares used to calculate basic net income per share 50,493 50,734 50,346 50,686 Shares used to calculate diluted net income per share 51,782 52,182 51,606 52,038 eResearchTechnology, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, June 30, 2008 ASSETS 2007 (unaudited) Current assets: Cash and cash equivalents $38,082 $49,446 Short-term investments 8,797 6,405 Accounts receivable, net 26,718 29,302 Prepaid income taxes 743 - Prepaid expenses and other 3,087 4,291 Deferred income taxes 901 899 Total current assets 78,328 90,343 Property and equipment, net 33,347 29,852 Goodwill 30,908 33,229 Intangible assets 3,849 2,947 Deferred income taxes 1,011 1,375 Other assets 253 660 Total assets $147,696 $158,406 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,505 $3,223 Accrued expenses 12,103 8,078 Income taxes payable 2,352 1,970 Current portion of capital lease obligations 1,097 290 Deferred revenues 13,905 14,487 Total current liabilities 32,962 28,048 Capital lease obligations, excluding current portion 48 - Other liabilities 1,174 1,162 Total liabilities 34,184 29,210 Stockholders' equity: Preferred stock-$10.00 par value, 500,000 shares authorized, none issued and outstanding - - Common stock-$.01 par value, 175,000,000 shares authorized, 58,870,291 and 59,081,686 shares issued, respectively 589 591 Additional paid-in capital 87,957 91,217 Accumulated other comprehensive income 1,679 1,695 Retained earnings 85,477 97,883 Treasury stock, 8,247,119 shares at cost (62,190) (62,190) Total stockholders' equity 113,512 129,196 Total liabilities and stockholders' equity $147,696 $158,406 eResearchTechnology, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2007 2008 Operating activities: Net income $6,387 $12,406 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,139 8,574 Cost of sales of equipment 535 492 Provision for uncollectible accounts - 60 Share-based compensation 1,142 1,366 Deferred income taxes 294 (360) Changes in operating assets and liabilities exclusive of CCSS acquisition: Accounts receivable (2,269) (2,622) Prepaid expenses and other (833) (1,616) Accounts payable (2,184) (240) Accrued expenses 382 (1,013) Income taxes 2,553 348 Deferred revenues (647) 583 Net cash provided by operating activities 12,499 17,978 Investing activities: Purchases of property and equipment (7,995) (5,239) Purchases of investments (40,651) - Proceeds from sales of investments 39,530 2,392 Payments for acquisition - (4,798) Net cash used in investing activities (9,116) (7,645) Financing activities: Repayment of capital lease obligations (1,132) (855) Proceeds from exercise of stock options 1,462 1,174 Stock option income tax benefit 578 704 Net cash provided by financing activities 908 1,023 Effect of exchange rate changes on cash 108 8 Net increase in cash and cash equivalents 4,399 11,364 Cash and cash equivalents, beginning of period 15,497 38,082 Cash and cash equivalents, end of period $19,896 $49,446
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