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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 /PRNewswire-FirstCall/ -- 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 The webcast may also be accessed at Thomson's Institutional Investor website at The webcast can be accessed until August 4, 2009 on either site.

About eResearchTechnology, Inc.

Based in Philadelphia, PA, eResearchTechnology, Inc. ( 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)


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


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)


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

SOURCE eResearchTechnology, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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