PHILADELPHIA, Aug. 3 /PRNewswire-FirstCall/ -- eResearchTechnology, Inc. (“eRT” or the “company”), a leading provider of technology and services to the pharmaceutical, biotechnology and medical device industries, today announced results for the second quarter ended June 30, 2006.
The company reported revenues of $22.8 million for the second quarter, compared to $17.6 million in revenue reported for the second quarter of 2005. The revenue results were 29.8 percent greater than the second quarter of 2005, while bookings for the second quarter of 2006 were $35.1 million compared to bookings of $25.6 million from the prior year’s quarter.
eRT recorded net income for the second quarter of 2006 of $1.7 million, or $0.03 per diluted share based on 51.5 million shares, versus net income of $2.0 million, or $0.04 per diluted share based on 53.1 million shares, for the second quarter of 2005. The decrease in shares utilized in these computations was directly related to the Company’s share buyback. The results for the 2006 second quarter include stock option compensation expenses, severance and other costs associated with transitioning from the prior Chief Executive and Chief Financial Officers to the current team and certain other professional fees; there were no comparable costs for the same period in 2005. The total of all such costs were $1.6 million or $0.02 per diluted share.
“The quarter was a transitional one for the Company,” said Michael McKelvey, the Company’s new Chief Executive Officer. “Although we were disappointed in the performance of the Company’s quarterly revenues compared to prior guidance, we remain encouraged by the continued growth of bookings, which exceeded our estimates and are indicative of the ongoing strength in the Company’s ability to win new business supported by continued adoption of digital ECG methodology. The fundamentals of the company and the industry are strong, and the bookings give us confidence in our ability to deliver future growth. Our ECG platform provides the opportunity for growth and expansion of cardiac safety services for the drug development clinical research industry.”
Highlights for the quarter ended June 30, 2006 were: -- Hiring of Dr. Michael McKelvey, President and Chief Executive Officer, who started at the end of June and Richard Baron, Executive Vice President and Chief Financial Officer who started in mid-May. -- Signings of $35.1 million in new contracts and work orders; second highest in company history. -- The company entered into 9 new Thorough QT definitive ECG agreements valued at approximately $8.3 million in the quarter as well as an additional $8.3 million in program level awards.
For the six months ended June 30, 2006, the company reported revenues of $44.2 million, compared to $40.5 million in revenues for the six months ended June 30, 2005. eRT reported net income of $3.6 million or $0.07 per diluted share for the six months ended June 30, 2006, compared to net income of $6.0 million, or $0.11 per diluted share for the prior year six months.
eRT ended the quarter with $49.8 million in cash, cash equivalents and investments, an increase from $47.3 million at March 31, 2006. The increase in cash was predominately due to net cash from operations excluding non-cash share-based compensation. During the second quarter of 2006 eRT did not purchase any shares of its common stock.
During the second half of 2006 eRT anticipates it will record revenues of between $47 million and $52 million and net income of $0.13 to $0.17 per diluted share. For the full year 2006, the company expects revenue and earnings per diluted share to be reduced from the previously provided guidance to approximately $92 million to $96 million for revenue and $0.20 to $0.24 for earnings per diluted share. The guidance has been reduced from the previous full year guidance of $112 to $118 million for revenue and $0.42 to $0.48 for the full year’s earnings per diluted share. The guidance estimates for the second half of the year includes consideration of the anticipated impact of severance arrangements of the prior CEO and include the anticipated impact of expensing stock options under SFAS No. 123R; the impact of these items are approximately $0.03 per diluted share for the second half of 2006 and $0.05 for the full year 2006.
Dr. Michael McKelvey and Mr. Richard Baron, the company’s Chief Executive Officer and Chief Financial Officer, respectively, will hold a conference call to discuss these results. The conference call will take place at 5:00 p.m. EDT on August 3, 2006. Interested participants should call 800-817-4887 when calling within the United States or 913-981-4913 when calling internationally. There will be a playback available until September 3, 2006. To listen to the playback, please call 888-203-1112 when calling within the United States or 719-457-0820 when calling internationally. Please use pass code 4322999 for the replay.
This call is being webcast by ViaVid Broadcasting and can be accessed at eRT’s web site at http://www.eRT.com. The webcast may also be accessed at ViaVid’s website at http://viavid.net/dce.aspx?sid=0000334B The webcast can be accessed until September 3, 2006 on either site.
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, 2006 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, 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 Report on Form 10-K 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, 2005 2006 2005 2006 Net revenues: Licenses $1,746 $1,096 $3,409 $1,734 Services 11,245 12,822 27,147 27,547 Site support 4,586 8,900 9,935 14,936 Total net revenues 17,577 22,818 40,491 44,217 Costs of revenues: Cost of licenses 104 77 237 153 Cost of services 5,576 6,300 12,066 12,456 Cost of site support 3,148 5,791 6,331 9,944 Total costs of revenues 8,828 12,168 18,634 22,553 Gross margin 8,749 10,650 21,857 21,664 Operating expenses: Selling and marketing 2,107 3,178 4,445 6,216 General and administrative 2,639 3,974 5,535 7,813 Research and development 903 1,034 1,894 2,348 Total operating expenses 5,649 8,186 11,874 16,377 Operating income 3,100 2,464 9,983 5,287 Other income, net 170 338 165 728 Income before income taxes 3,270 2,802 10,148 6,015 Income tax provision 1,304 1,125 4,110 2,414 Net income $1,966 $1,677 $6,038 $3,601 Basic net income per share $0.04 $0.03 $0.12 $0.07 Diluted net income per share $0.04 $0.03 $0.11 $0.07 Shares used to calculate basic net income per share 50,388 49,266 50,379 49,184 Shares used to calculate diluted net income per share 53,133 51,515 53,229 51,600 eResearchTechnology, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2005 June 30, 2006 ASSETS (unaudited) Current assets: Cash and cash equivalents $18,432 $9,180 Short-term investments 33,569 38,686 Accounts receivable, net 15,178 14,299 Prepaid income taxes 27 1,619 Prepaid expenses and other 2,501 3,610 Deferred income taxes 841 865 Total current assets 70,548 68,259 Property and equipment, net 28,670 30,824 Goodwill 1,212 1,212 Long-term investments 3,008 1,971 Deferred income taxes 335 736 Other assets 993 884 $104,766 $103,886 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $2,332 $3,811 Accrued expenses 5,155 4,364 Income taxes payable 1,041 746 Current portion of capital lease obligations 153 118 Deferred revenues 16,072 10,336 Total current liabilities 24,753 19,375 Capital lease obligations, excluding current portion 40 - 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, 56,871,010 and 57,622,811 shares issued, respectively 569 576 Additional paid-in capital 73,290 79,348 Accumulated other comprehensive income 586 1,261 Retained earnings 61,915 65,516 Treasury stock, 7,847,119 and 8,247,119 shares at cost, respectively (56,387) (62,190) Total stockholders’ equity 79,973 84,511 $104,766 $103,886 eResearchTechnology, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2005 2006 Operating activities: Net income $6,038 $3,601 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,209 5,772 Cost of sale of equipment 281 2,612 Provision for uncollectible accounts 89 - Non-cash share-based compensation - 1,643 Stock option income tax benefits 993 - Investment impairment charge 284 - Changes in operating assets and liabilities: Accounts receivable 3,552 960 Prepaid expenses and other (3,026) (961) Accounts payable 569 1,458 Accrued expenses (211) (823) Income taxes (486) (2,332) Deferred revenues 524 (5,788) Net cash provided by operating activities 13,816 6,142 Investing activities: Purchases of property and equipment (6,726) (10,007) Purchases of investments (23,025) (18,720) Proceeds from sales of investments 12,750 14,640 Net cash used in investing activities (17,001) (14,087) Financing activities: Repayment of capital lease obligations (161) (75) Proceeds from exercise of stock options 722 2,062 Excess tax benefit related to stock options - 2,365 Repurchase of common stock for treasury (2,243) (5,803) Net cash used in financing activities (1,682) (1,451) Effect of exchange rate changes on cash (278) 144 Net decrease in cash and cash equivalents (5,145) (9,252) Cash and cash equivalents, beginning of period 45,806 18,432 Cash and cash equivalents, end of period $40,661 $9,180 eResearchTechnology, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Information For the Three and Six Months Ended June 30, 2005 and 2006 (in thousands) (unaudited) Three Months Six Months Ended June 30 Ended June 30 2005 2006 2005 2006 Gross margin: GAAP gross margin $8,749 $10,650 $21,857 $21,664 Stock based employee compensation expense $- $221 $- $420 Non-GAAP income gross margin $8,749 $10,871 $21,857 $22,084 Reconciliation of GAAP to Non-GAAP operating income: GAAP operating income $3,100 $2,464 $9,983 $5,287 Stock based employee compensation expense - 913 - 1,640 CEO and CFO transition - 731 - 1,200 Settlement of contract dispute - - - 646 Subtotal of reconciling items - 1,644 - 3,486 Non-GAAP operating income $3,100 $4,108 $9,983 $8,773 Reconciliation of GAAP to Non-GAAP net income and net income per diluted share: GAAP net income $1,966 $1,677 $6,038 $3,601 Stock based employee compensation expense - 726 - 1,349 CEO and CEO transition - 438 - 718 Settlement of contract dispute - - - 387 Subtotal of reconciling items - 1,164 - 2,454 Non-GAAP net income $1,966 $2,841 $6,038 $6,055 GAAP net income per diluted share $0.04 $0.03 $0.11 $0.07 Non-GAAP net income per diluted share $0.04 $0.06 $0.11 $0.12
eResearchTechnology, Inc.
CONTACT: Richard Baron of eResearchTechnology, Inc., +1-215-282-5566; orMatt Hayden of Hayden Communications, +1-858-704-5065, foreResearchTechnology, Inc.
Web site: http://www.ert.com/
