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ERT Reports First Quarter 2009 Results

PHILADELPHIA, April 30 /PRNewswire-FirstCall/ -- eResearchTechnology, Inc. (ERT), (Nasdaq: ERES), a leading provider of centralized ECG, eClinical technology, ePRO and other services to the biopharmaceutical, medical device, and related industries, announced today results for the first quarter of 2009. Unless otherwise noted, all comparative numbers refer to changes from the same period a year ago.

Highlights of the first quarter were:

  • Quarterly net revenue was $23.8 million for the first quarter of 2009 compared to $33.7 million a year ago.
  • Gross margin percentage was 50.4% in the first quarter of 2009 compared to 52.5% a year ago.
  • Operating income margin percentage was 14.0% in the first quarter of 2009 compared to 25.2% a year ago.
  • ERT's tax rate was 40.1% in the first quarter of 2009 compared to 35.6% a year ago.
  • Net income was $2.1 million for the first quarter of 2009 compared to $5.7 million a year ago.
  • Diluted net income per share was $0.04 in the first quarter of 2009 compared to $0.11 a year ago.
  • New bookings were $31.2 million in the first quarter of 2009 compared to $50.1 million a year ago.
  • Total expenses were $20.4 million in the first quarter of 2009, compared to $25.2 million a year ago.
  • Cash flow from operations in the first quarter of 2009 was $9.1 million, compared to $7.6 million a year ago.
  • Cash, cash equivalents and investments totaled $65.6 million at March 31, 2009 compared to $66.4 million at December 31, 2008.
  • ERT purchased 1,965,452 shares of its common stock at an average price of $5.05 under its approved stock repurchase program in the first quarter of 2009 at a total cost of $10.0 million.
  • Backlog was $157.0 million as of March 31, 2009 compared to $151.4 million a year ago. The annualized cancellation rate was 22.4% in the first quarter of 2009 compared to 19.3% in the fourth quarter of 2008 and 15.6% in the first quarter of 2008.

"The results for this quarter were in line with our expectations, as given by our guidance in February," commented Dr. Michael McKelvey, President and CEO of ERT. "The first quarter was marked by a significant decline in revenue, in large part due to a sharp reduction in Thorough QT revenue. This reflects the ability of companies to delay the running of Thorough QT trials until later in the drug development cycle, though current regulatory guidance ultimately requires that they be performed. Routine revenue (Phase I through Phase IV trials) was also impacted as a result of the larger percentage of our past business being booked in Phase III trials, which are longer-term trials and thus take longer to turn into revenue, as well as a slower rate of spending by our pharmaceutical and biotechnology clients. The latter reflects the current difficult economic environment and the uncertainty seen in pharmaceutical sponsors' spending. Despite the revenue decline, our gross margin percentage remained above 50%. We continue to be pleased with our strong operational performance and with the results of our discussions with key pharmaceutical and biotechnology companies on strategic outsourcing relationships."

"We made good progress on our strategic priorities in the first quarter," continued Dr. McKelvey. "We continue to be successful in winning new and expanded exclusive or near-exclusive long-term enterprise partnerships with large clients, which should positively impact our future levels of new booking activity. We successfully launched two significant efforts aimed at expanding industry penetration of centralized ECGs by focusing on how centralization of ECGs can reduce our clients' costs. We began to see the results of our new marketing programs in increased market awareness. Despite the difficult economic and financial environment we feel that the fundamentals of our industry remain strong and that we are successfully positioning ourselves for additional growth in the future."

2009 Guidance

The Company issued guidance for the second quarter of 2009 and for the full year 2009. For the quarter ending June 30, 2009, management anticipates net revenues of between $23.0 million and $26.0 million and diluted net income per share between $0.03 and $0.06. ERT expects full year 2009 net revenues of between $100.0 million and $115.0 million with diluted net income per share of between $0.20 and $0.35.

Conference Call

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 PM EDT on April 30, 2009. For the conference call, interested participants should dial 1-800-901-5241 when calling within the United States or 1-617-786-2963 when calling internationally. Please use pass code 33830510. There will be a playback available as well. To listen to the playback, please call 1-888-286-8010 when calling within the United States or 1-617-801-6888 when calling internationally. Please use pass code 52329119 for the replay.

This call is being webcast by Thomson Financial and can be accessed at ERT's web site at The webcast may also be accessed at Thomson's Institutional Investor website at The webcast can be accessed for up to one year on either site.

About eResearchTechnology, Inc.

Based in Philadelphia, PA, eResearchTechnology, Inc. ( is a provider of technology and services to the biopharmaceutical, medical device and related 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 also provides 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.

This release may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events and financial performance with respect to our operations. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "aim," "anticipate," "are confident," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "look to" and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause such a difference include: unfavorable economic conditions; our ability to obtain new contracts and accurately estimate net revenues due to variability in size, scope and duration of projects and internal issues at the sponsoring client; integration of future acquisitions; competitive factors; technological development; and market demand. There is no guarantee that the amounts in our backlog will ever convert to revenue. Should the current economic conditions continue or deteriorate further, the cancellation rates that we have historically experienced could increase. 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. Guidance is based on management's good faith expectations given current market conditions but that continued or further deterioration of general economic conditions, in addition to other factors cited elsewhere, could result in the company not achieving the revenue and earnings per diluted share guidance provided.

Forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements, including prior forward-looking statements, to reflect the events or circumstances arising after the date as of which they were made. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included in this release or that may be made in our filings with the Securities and Exchange Commission or elsewhere from time to time by, or on behalf of, us.

                    eResearchTechnology, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                     (in thousands, except per share amounts)

                                               Three Months Ended March 31,
                                                  2008              2009

    Net revenues:
      Licenses                                     $625              $709
      Services                                   25,273            16,817
      Site support                                7,775             6,260

    Total net revenues                           33,673            23,786

    Costs of revenues:
      Cost of licenses                              200               205
      Cost of services                           10,514             7,954
      Cost of site support                        5,268             3,635

    Total costs of revenues                      15,982            11,794

    Gross margin                                 17,691            11,992

    Operating expenses:
      Selling and marketing                       3,323             3,426
      General and administrative                  4,873             4,077
      Research and development                      999             1,149

    Total operating expenses                      9,195             8,652

    Operating income                              8,496             3,340
    Other income, net                               427               116

    Income before income taxes                    8,923             3,456
    Income tax provision                          3,177             1,386

    Net income                                   $5,746            $2,070

    Basic net income per share                    $0.11             $0.04

    Diluted net income per share                  $0.11             $0.04

    Shares used to calculate basic net
     income per share                            50,638            50,879

    Shares used to calculate diluted net
     income per share                            51,894            51,164

                   eResearchTechnology, Inc. and Subsidiaries
                            Consolidated Balance Sheets
               (in thousands, except share and per share amounts)

                                        December 31, 2008    March 31, 2009
    ASSETS                                  (unaudited)

    Current assets:
      Cash and cash equivalents                $66,376           $65,518
      Short-term investments                        50                50
      Accounts receivable, net                  29,177            21,676
      Prepaid income taxes                       1,892             1,818
      Prepaid expenses and other                 2,885             3,285
      Deferred income taxes                      1,831             1,703
        Total current assets                   102,211            94,050

    Property and equipment, net                 29,639            27,105
    Goodwill                                    34,603            34,653
    Intangible assets                            2,149             2,012
    Other assets                                   520               447

        Total assets                          $169,122          $158,267


    Current liabilities:
      Accounts payable                          $3,971            $5,153
      Accrued expenses                           8,140             4,690
      Income taxes payable                       2,492               805
      Current portion of capital lease
       obligations                                  43                 -
      Deferred revenues                         12,276            12,608
        Total current liabilities               26,922            23,256

    Deferred rent                                2,183             2,296
    Deferred income taxes                        1,332             1,326
    Other liabilities                            1,257             1,117

        Total liabilities                       31,694            27,995

    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,
       59,950,257 and 59,974,108 shares
       issued, respectively                        600               600
      Additional paid-in capital                93,828            94,826
      Accumulated other comprehensive income    (2,716)           (2,948)
      Retained earnings                        110,479           112,549
      Treasury stock, 8,686,868 and
       10,652,320 shares at cost,
       respectively                            (64,763)          (74,755)

        Total stockholders' equity             137,428           130,272

        Total liabilities and
         stockholders' equity                 $169,122          $158,267

                     eResearchTechnology, Inc. and Subsidiaries
                        Consolidated Statements of Cash Flows
                                   (in thousands)

                                                Three Months Ended March 31,
                                                    2008              2009

    Operating activities:
      Net income                                  $5,746            $2,070
      Adjustments to reconcile net income
       to net cash provided by operating
        Depreciation and amortization              4,344             3,404
        Cost of sales of equipment                   414                 7
        Provision for uncollectible accounts          30               105
        Share-based compensation                     470               901
        Deferred income taxes                       (362)              111
        Changes in operating assets and
          Accounts receivable                       (222)             7,331
          Prepaid expenses and other                 (11)              (459)
          Accounts payable                          (984)               143
          Accrued expenses                        (1,413)            (3,436)
          Income taxes                                63             (1,601)
          Deferred revenues                         (344)               384
          Deferred rent                             (135)               107
            Net cash provided by operating
             activities                            7,596              9,067

    Investing activities:
      Purchases of property and equipment         (1,430)            (1,613)
      Proceeds from sales of investments             455                  -
      Payments for acquisition                    (3,673)                 -
            Net cash used in investing
             activities                           (4,648)            (1,613)

    Financing activities:
      Repayment of capital lease obligations        (751)               (43)
      Proceeds from exercise of stock options        189                 59
      Stock option income tax benefit                103                 38
      Repurchase of common stock for treasury          -             (8,190)
           Net cash used in financing activities    (459)            (8,136)

    Effect of exchange rate changes on cash           (3)              (176)

    Net increase (decrease) in cash and
     cash equivalents                              2,486               (858)
    Cash and cash equivalents, beginning
     of period                                    38,082             66,376

    Cash and cash equivalents, end of period     $40,568            $65,518

SOURCE eResearchTechnology, Inc.
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