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ERT Reports Fourth Quarter and Full Year 2011 Operating Results  
2/28/2012 10:00:23 AM

PHILADELPHIA, Feb. 27, 2012/PRNewswire/ -- eResearchTechnology, Inc. (ERT), (Nasdaq: ERT) a global technology-driven provider of health outcomes research services and customizable medical devices to biopharmaceutical sponsors and contract research organizations (CROs),announced results today for the fourth quarter and fiscal year ended December 31, 2011. Unless otherwise noted, all comparative numbers refer to changes from the same period a year ago. The financial results for 2010 include the seven months' results related to the acquisition of CareFusion Research Services (RS or German operations) that was completed on May 28, 2010.

This press release contains financial measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and non-GAAP measures adjusted to exclude the impact of the amortization of the acquired intangibles and other assets, acquisition and other costs related to the RS acquisition, an investment impairment and related income tax effects. A reconciliation of these GAAP and non-GAAP measures is found in the attached "Reconciliation of GAAP to Non-GAAP Information."

Financial Highlights for the Fourth Quarter of 2011

  • Net revenues were $52.3 million for the fourth quarter of 2011 compared to $48.1 million for the third quarter of 2011 and $44.9 million a year ago.
  • GAAP gross margin percentage was 40.9% in the fourth quarter of 2011 compared to 41.5% for the third quarter of 2011 and 43.9% a year ago. Non-GAAP gross margin percentage was 44.9% in the fourth quarter of 2011 compared to 45.5% for the third quarter of 2011 and 49.0% a year ago. The GAAP and Non-GAAP gross margin percentage decline year over year was due to higher costs associated with the ramp up of our German operations to meet customer study deliverables, integration related activities and additions to inventory reserves.
  • GAAP operating income margin percentage was 12.1% in the fourth quarter of 2011 compared to 10.9% for the third quarter of 2011 and 11.6% a year ago. Non-GAAP operating income margin percentage was 16.2% in the fourth quarter of 2011 compared to 14.9% for the third quarter of 2011 and 18.5% a year ago.
  • GAAP net income was $4.5 million, or $0.09 per diluted share, in the fourth quarter of 2011 compared to $4.3 million, or $0.09 per diluted share, in the third quarter of 2011 and $4.1 million, or $0.08 per diluted share, a year ago. Impacting GAAP net income is a $0.7 million charge recorded in other expense, net for an investment impairment of marketable securities that we received in connection with the sale of our former EDC operations in 2009. Non-GAAP net income was $6.9 million, or $0.14 per diluted share, in the fourth quarter of 2011 compared to $5.6 million, or $0.11 per diluted share, in the third quarter of 2011 and $6.1 million, or $0.12 per diluted share, a year ago.
  • Cash flow from operations was $19.5 million in the fourth quarter of 2011, compared to $9.2 million in the third quarter of 2011 and $17.1 million a year ago.
  • Cash and short-term investments totaled $39.0 million at December 31, 2011 compared to $30.4 million at December 31, 2010.
  • New bookings were $82.5 million in the fourth quarter of 2011 compared to $78.4 million for the third quarter of 2011 and $58.9 million a year ago.
  • The gross book-to-bill ratio was 1.6 in the fourth quarter of 2011 compared to 1.6 in the third quarter of 2011 and 1.3 a year ago.
  • Backlog was $357.4 million at December 31, 2011 compared to $343.8 million at September 30, 2011 and $302.9 million at December 31, 2010. The annualized cancellation rate was 16.8% in the fourth quarter of 2011 compared to 14.6% in the third quarter of 2011 and 16.6% a year ago.

Financial highlights for the full year of 2011

  • Net revenues were $184.9 million for the year ended December 31, 2011 compared to $141.0 million for the year ended December 31, 2010. Revenues from our German operations were $87.9 million for the year ended December 31, 2011 and $47.2 million from the date of acquisition to December 31, 2010.
  • GAAP gross margin percentage was 41.0% for the year ended December 31, 2011 compared to 47.8% for the year ended December 31, 2010. Non-GAAP gross margin percentage was 45.2% for the year ended December 31, 2011 compared to 51.7% for the year ended December 31, 2010.
  • GAAP operating income margin percentage was 10.5% for the year ended December 31, 2011 compared to 11.1 % for the year ended December 31, 2010. Non-GAAP operating income margin percentage was 14.8% for the year ended December 31, 2011 compared to 19.2% for the year ended December 31, 2010.
  • GAAP net income was $13.7 million, or $0.28 per diluted share, for the year ended December 31, 2011 compared to $9.9 million, or $0.20 per diluted share, for the year ended December 31, 2010. Non-GAAP net income was $20.0 million, or $0.41 per diluted share, for the year ended December 31, 2011 compared to $18.4 million, or $0.37 per diluted share, for the year ended December 31, 2010.
  • Cash flow from operations was $42.5 million for the year ended December 31, 2011 compared to $35.9 million for the year ended December 31, 2010.
  • New bookings were $303.5 million for the year ended December 31, 2011 compared to $212.2 million for the year ended December 31, 2010.

"We are pleased with the Company's results, which include record revenues and bookings for the fourth quarter and full year," commented Dr. Jeffrey Litwin, President and CEO of ERT. "This is the first quarter our bookings have ever exceeded $80 million and it marks the fourth consecutive quarter of more than $70 million in bookings. Bookings growth was driven by sustained strength in both our cardiac safety and respiratory solutions. Our continued growth shows that our message, outlining the benefits of centralization, along with the ability to purchase high quality cardiac safety, respiratory and ePRO services from one vendor is resonating with our clients."

"We enter 2012, having completed the integration of our German operations and we launched our next generation platform, EXPERT 3 in January 2012," continued Dr. Litwin. "EXPERT 3 unifies our core offerings onto a single software platform with a unified portal technology. It provides meaningful increases in capacity and should drive efficiencies while providing additional value to our clients as we progress through 2012. We also launched Master Scope 32, our new laptop based platform for use at our investigator sites in support of all of our business lines."

2012 Guidance

The Company issued guidance for the full year of 2012. ERT expects net revenues of between $195 million and $203 million for 2012. ERT expects GAAP diluted net income per share to be between $0.40 and $0.48 for 2012 and non-GAAP diluted net income per share to be between $0.45 and $0.53 for the same period.

For the first quarter ending March 31, 2012, ERT expects net revenues of between $46 million and $49 million, GAAP diluted net income per share to be between $0.07 and $0.10 and non-GAAP diluted net income per share to be between $0.08 and $0.11.

Use of Non-GAAP Financial Measures

In addition to GAAP financial measures, ERT uses certain non-GAAP financial measures that exclude charges related to the amortization of the RS acquired intangible and other assets and acquisition and other costs which are related to the RS acquisition and in 2011 an other-than-temporary impairment of marketable securities that we received in connection with the sale of our former EDC operations in 2009, and also their related income tax effects. ERT believes that these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons of its operations from period to period and to the performance of other companies within its industry and assists in gaining a better understanding of its operating results and future prospects. ERT views amortization of acquired intangible and other assets related to the RS acquisition, which includes such items as the amortization of acquired customer backlog and technology, as items determined at the time of the acquisition. While ERT reviews the underlying value of these intangibles regularly for impairment, the amortization is an expense typically not affected by operations during any particular period and does not contribute to the operational performance in any particular period. ERT regards acquisition and other costs related to its recent acquisition and the other-than-temporary impairment charge as costs that do not recur on a regular basis.

ERT's non-GAAP effective tax rates differ from its GAAP effective tax rates for 2011 because of 1) the exclusion of the amortization of acquired intangible and other assets and acquisition and other costs related to its recent acquisition of RS, and 2) the income tax effect due to the difference between the GAAP and non-GAAP effective tax rate applied against the GAAP pre-tax income, primarily as a result of the acquisition costs and the other-than-temporary impairment charge not being deductible for income tax purposes. ERT excludes the impact of these discrete tax items from its non-GAAP income tax provision because it believes they are not indicative of the effective income tax rate of its ongoing business operations.

Management uses these non-GAAP financial measures, in addition to the measures prepared in accordance with GAAP, as the basis for measuring ERT's operating performance, financial and operating decision-making, development of budgets and comparing such performance to that of prior periods for the same reasons stated above. These non-GAAP financial measures are not meant to be considered superior to or a substitute for comparable financial measures prepared in accordance with GAAP. There are also limitations on the non-GAAP measures, including: 1) these non-GAAP measures do not have standardized meanings and may not be comparable to similar non-GAAP measures used by other companies, 2) acquisition and other costs related to ERT's recent acquisition of RS represent actual cash expenditures that are excluded from ERT's non-GAAP measures, and 3) although amortization of acquired intangible and other assets does not directly impact ERT's current cash position, such expense is amortized over their expected economic lives and does represent the declining value of the assets acquired, but this expense is excluded from ERT's non-GAAP measures. ERT adjusts for these limitations by relying on these non-GAAP measures only as a supplement to its GAAP results.

Conference Call

Dr. Litwin, the Company's President and CEO, and Mr. 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 EST on February 27, 2012. For the conference call, interested participants should dial 1-800-860-2442 when calling within the United States or 1-412-858-4600 when calling internationally. There will be a playback available as well. To listen to the playback, please call 1-877-344-7529 when calling within the United States or 1-412-317-0088 when calling internationally. Conference code for playback is 10010375. This call is being webcast by MultiVu and can be accessed at ERT's website at www.ert.com. The webcast may also be accessed via the link at http://www.videonewswire.com/event.asp?id=85360.

The webcast can be accessed for up to one year on either site.

About eResearchTechnology, Inc.

ERT (www.ert.com) is a global technology-driven provider of health outcomes research services and customizable medical devices supporting biopharmaceutical sponsors and contract research organizations (CROs) to achieve their drug development and healthcare objectives. ERT harnesses leading technology coupled with unrivaled processes and scientific expertise to collect, analyze, and report on clinical data to support the determination of health outcomes critical to the approval, labeling and reimbursement of pharmaceutical products. ERT is the acknowledged industry leader in centralized cardiac safety and respiratory efficacy services and also provides electronic Patient Reported Outcomes (ePRO) and outcomes assessments for multiple modalities across all phases.


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