Attached files
file | filename |
---|---|
8-K - FORM 8-K - ERESEARCHTECHNOLOGY INC /DE/ | c16358e8vk.htm |
EX-99.2 - EXHIBIT 99.2 - ERESEARCHTECHNOLOGY INC /DE/ | c16358exv99w2.htm |
Exhibit 99.1
ERT Reports First Quarter 2011 Operating Results
| Revenues of $41.7 million | ||
| GAAP diluted net income per share of $0.06 / Non-GAAP diluted net income per share of $0.09 | ||
| Bookings of $71.8 million |
PHILADELPHIA, May 2, 2011 /PRNewswire-FirstCall/ eResearchTechnology, Inc. (ERT), (Nasdaq: ERT -
News) a global technology-driven provider of services and customizable medical devices to
biopharmaceutical and healthcare organizations and the market leader for centralized cardiac safety
and respiratory efficacy services in drug development, announced today results for the first
quarter ended March 31, 2011. Unless otherwise noted, all comparative numbers refer to changes
from the same period a year ago. The financial results include the results related to CareFusion
Research Services (RS) commencing from its date of acquisition 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 and acquisition and other
costs related to the RS acquisition 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 First Quarter of 2011
| Net revenues were $41.7 million for the first quarter of 2011 compared to $44.9 million for the fourth quarter of 2010 and $21.9 million a year ago. Revenues from RS were $18.9 million in the first quarter of 2011, compared to $20.0 million in the fourth quarter of 2010. | ||
| GAAP gross margin percentage was 44.2% in the first quarter of 2011 compared to 43.9% for the fourth quarter of 2010 and 53.8% a year ago. Non-GAAP gross margin percentage was 48.7% in the first quarter of 2011 compared to 49.0% for the fourth quarter of 2010 and 53.8% a year ago. | ||
| GAAP operating income margin percentage was 12.8% in the first quarter of 2011 compared to 11.6% for the fourth quarter of 2010 and 12.6% a year ago. Non-GAAP operating income margin percentage was 17.3% in the first quarter of 2011 compared to 18.5% for the fourth quarter of 2010 and 16.0% a year ago. | ||
| GAAP net income was $3.1 million, or $0.06 per diluted share, in the first quarter of 2011 compared to $4.1 million, or $0.08 per diluted share, in the fourth quarter of 2010 and $1.8 million, or $0.04 per diluted share, a year ago. Non-GAAP net income was $4.5 million, or $0.09 per diluted share, in the first quarter of 2011 compared to $6.1 million, or $0.12 per diluted share, in the fourth quarter of 2010 and $2.2 million, or $0.05 per diluted share, a year ago. |
1
| Cash flow from operations was $5.0 million in the first quarter of 2011, compared to $17.1 million in the fourth quarter of 2010 and $5.3 million a year ago. | ||
| Cash and short-term investments totaled $29.7 million at March 31, 2011 compared to $30.4 million on December 31, 2010. ERT had $21.0 million in long-term debt as of March 31, 2011 and December 31, 2010. | ||
| New bookings were $71.8 million in the first quarter of 2011 compared to $58.9 million for the fourth quarter of 2010 and $43.3 million a year ago. | ||
| The gross book-to-bill ratio was 1.7 in the first quarter of 2011 compared to 1.3 in the fourth quarter of 2010 and 2.0 a year ago. | ||
| Backlog was $318.6 million as of March 31, 2011 compared to $302.9 million as of December 31, 2010 and $182.7 million a year ago (which did not include RS). The annualized cancellation rate was 24.6% in the first quarter of 2011 compared to 16.6% in the fourth quarter of 2010 and 21.3% a year ago. |
We are very pleased with the record $71.8 million of bookings reported in this quarter, commented
Dr. Joel Morganroth. This was driven by strong bookings using our integrated solution, which
combines respiratory, cardiac safety, and ePRO to our customers. Our revenue level was slightly
lower than expected due to a large TQT cancellation during the quarter. We also experienced higher
cancellations in our respiratory business as three large studies were terminated by the sponsors.
We managed to moderate our expenses as some of the 2011 planned hiring and other investments were
delayed. Offsetting this was the negative impact of the foreign exchange rate changes, which
resulted in a charge of approximately $0.01 per share. Overall, we believe we are off to a strong
start for 2011.
I am also very excited to have Dr. Jeffrey Litwin appointed as our new President and Chief
Executive Officer as previously announced earlier today, continued Dr. Morganroth. Jeff and I
have worked together for many years, and he brings knowledge of the clinical research domain that
is our core business and also experience in the adjacent markets of Phase IV safety surveillance
and healthcare.
2011 Guidance
The Company reaffirmed its previously-issued guidance for the full year of 2011. ERT expects net
revenues of between $178 million and $188 million for 2011. ERT expects GAAP diluted net income
per share to be between $0.30 and $0.40 for 2011 and non-GAAP diluted net income per share to be
between $0.40 and $0.50 for the same period. For the second quarter ending June 30, 2011, ERT
expects net revenues of between $43.0 million and $46.0 million, GAAP diluted net income per share
to be between $0.05 and $0.08 and non-GAAP diluted net income per share to be between $0.08 and
$0.11.
2
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 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 as a cost that does not recur on a regular basis.
ERTs non-GAAP effective tax rates differ from its GAAP effective tax rates because of 1) the
exclusion of the amortization of acquired intangible and other assets and acquisition and other
costs incurred in 2010 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 incurred in 2010 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 ERTs 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 ERTs 2010 acquisition of RS
represent actual cash expenditures that are excluded from ERTs non-GAAP measures, and 3) although
amortization of acquired intangible and other assets does not directly impact ERTs 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 ERTs 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. Morganroth, Dr. Litwin, and Mr. Keith Schneck, the Companys Chief Financial Officer, will hold
a conference call to discuss these results. The conference call will take place at 5:00 PM ET on
May 2, 2011. 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 450262. This call is being webcast by MultiVu and can be accessed at ERTs website
at www.ert.com. The webcast may also be accessed via the direct link at
http://www.videonewswire.com/event.asp?id=78559. The webcast can be accessed for up to one year on
either site.
3
About eResearchTechnology, Inc.
ERT (www.ert.com) is a global technology-driven provider of clinical services and customizable
medical devices to biopharmaceutical and healthcare organizations. It is the market leader for
centralized cardiac safety and respiratory efficacy services in drug development and also collects,
analyzes and distributes electronic patient reported outcomes (ePRO) in multiple modalities across
all phases of clinical research.
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, our positive outlook for future bookings,
variability in size, scope and duration of projects and internal issues at the sponsoring client;
our ability to successfully integrate the RS or any future acquisitions; competitive factors in the
market for our centralized services; changes in the bio-pharmaceutical and healthcare industries to
which we sell our solutions; technological development; and market demand. There is no guarantee
that the amounts in our backlog will ever convert to revenue. Should the economic conditions
deteriorate, the cancellation rates that we have historically experienced could increase. Further
information on potential factors that could affect the Companys financial results can be found in
ERTs Reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission. Guidance is
based on managements 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 ERT not achieving the revenue and net income 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.
Contact: |
||
Keith Schneck
|
Robert East | |
eResearchTechnology, Inc.
|
Westwicke Partners, LLC | |
215-282-5566
|
443-213-0502 |
4
eResearchTechnology, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2011 | |||||||
Net revenues: |
||||||||
Services |
$ | 14,835 | $ | 23,977 | ||||
Site support |
7,033 | 17,722 | ||||||
Total net revenues |
21,868 | 41,699 | ||||||
Costs of revenues: |
||||||||
Cost of services |
7,311 | 13,156 | ||||||
Cost of site support |
2,799 | 10,123 | ||||||
Total costs of revenues |
10,110 | 23,279 | ||||||
Gross margin |
11,758 | 18,420 | ||||||
Operating expenses: |
||||||||
Selling and marketing |
3,408 | 4,175 | ||||||
General and administrative |
4,745 | 7,508 | ||||||
Research and development |
858 | 1,383 | ||||||
Total operating expenses |
9,011 | 13,066 | ||||||
Operating income |
2,747 | 5,354 | ||||||
Foreign exchange gains (losses) |
80 | (1,009 | ) | |||||
Other income (expense), net |
20 | (101 | ) | |||||
Income before income taxes |
2,847 | 4,244 | ||||||
Income tax provision |
1,095 | 1,151 | ||||||
Net income |
$ | 1,752 | $ | 3,093 | ||||
Net income per share: |
||||||||
Basic |
$ | 0.04 | $ | 0.06 | ||||
Diluted |
$ | 0.04 | $ | 0.06 | ||||
Shares used in computing net income per share: |
||||||||
Basic |
48,675 | 48,896 | ||||||
Diluted |
48,845 | 49,251 |
5
eResearchTechnology, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
December 31, 2010 | March 31, 2011 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 30,343 | $ | 29,614 | ||||
Short-term investments |
50 | 50 | ||||||
Investment in marketable securities |
648 | 1,053 | ||||||
Accounts receivable less allowance for doubtful accounts
of $515 and $547, respectively |
37,236 | 37,179 | ||||||
Inventory |
4,698 | 6,804 | ||||||
Prepaid income taxes |
1,988 | 2,660 | ||||||
Prepaid expenses and other |
4,393 | 5,531 | ||||||
Deferred income taxes |
3,431 | 3,431 | ||||||
Total current assets |
82,787 | 86,322 | ||||||
Property and equipment, net |
42,615 | 45,760 | ||||||
Goodwill |
71,637 | 76,702 | ||||||
Intangible assets |
17,187 | 17,435 | ||||||
Other assets |
609 | 718 | ||||||
Total assets |
$ | 214,835 | $ | 226,937 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 7,136 | $ | 6,613 | ||||
Accrued expenses |
16,162 | 12,971 | ||||||
Deferred revenues |
11,670 | 12,657 | ||||||
Total current liabilities |
34,968 | 32,241 | ||||||
Deferred rent |
2,368 | 2,405 | ||||||
Deferred income taxes |
3,703 | 3,888 | ||||||
Long-term debt |
21,000 | 21,000 | ||||||
Other liabilities |
2,141 | 2,235 | ||||||
Total liabilities |
64,180 | 61,769 | ||||||
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,
60,460,782 and 60,661,086 shares issued, respectively |
605 | 607 | ||||||
Additional paid-in capital |
100,441 | 101,438 | ||||||
Accumulated other comprehensive (loss) income |
(1,545 | ) | 8,922 | |||||
Retained earnings |
131,037 | 134,130 | ||||||
Treasury stock, 11,589,603 and 11,596,966 shares at cost |
(79,883 | ) | (79,929 | ) | ||||
Total stockholders equity |
150,655 | 165,168 | ||||||
Total liabilities and stockholders equity |
$ | 214,835 | $ | 226,937 | ||||
6
eResearchTechnology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2011 | |||||||
Operating activities: |
||||||||
Net income |
$ | 1,752 | $ | 3,093 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
2,624 | 5,988 | ||||||
Cost of sales of equipment |
1 | 3 | ||||||
Share-based compensation |
605 | 662 | ||||||
Deferred income taxes |
(160 | ) | 204 | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
1,033 | 1,030 | ||||||
Inventory |
| (1,412 | ) | |||||
Prepaid expenses and other |
(1,341 | ) | (1,363 | ) | ||||
Accounts payable |
539 | 91 | ||||||
Accrued expenses |
920 | (3,191 | ) | |||||
Income taxes |
(193 | ) | (736 | ) | ||||
Deferred revenues |
(368 | ) | 803 | |||||
Deferred rent |
(145 | ) | (164 | ) | ||||
Net cash provided by operating activities |
5,267 | 5,008 | ||||||
Investing activities: |
||||||||
Purchases of property and equipment |
(3,852 | ) | (7,254 | ) | ||||
Purchases of investments |
(999 | ) | | |||||
Proceeds from sales of investments |
3,716 | | ||||||
Payments for acquisitions |
(203 | ) | (117 | ) | ||||
Net cash used in investing activities |
(1,338 | ) | (7,371 | ) | ||||
Financing activities: |
||||||||
Proceeds from exercise of stock options |
51 | 309 | ||||||
Stock option income tax benefit |
6 | 11 | ||||||
Repurchase of common stock for treasury |
| (46 | ) | |||||
Net cash provided by financing activities |
57 | 274 | ||||||
Effect of exchange rate changes on cash |
(790 | ) | 1,360 | |||||
Net increase (decrease) in cash and cash equivalents |
3,196 | (729 | ) | |||||
Cash and cash equivalents, beginning of period |
68,979 | 30,343 | ||||||
Cash and cash equivalents, end of period |
$ | 72,175 | $ | 29,614 | ||||
7
eResearchTechnology, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Information
(in thousands, except per share amounts)
(unaudited)
Reconciliation of GAAP to Non-GAAP Information
(in thousands, except per share amounts)
(unaudited)
Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2010 | 2010 | 2011 | ||||||||||
Net revenues |
$ | 21,868 | $ | 44,900 | $ | 41,699 | ||||||
Reconciliation of GAAP to Non-GAAP gross margin: |
||||||||||||
GAAP gross margin |
$ | 11,758 | $ | 19,708 | $ | 18,420 | ||||||
Amortization of acquired intangibles and other assets |
| 2,288 | 1,878 | |||||||||
Non-GAAP gross margin |
$ | 11,758 | $ | 21,996 | $ | 20,298 | ||||||
Non-GAAP gross margin percentage |
53.8 | % | 49.0 | % | 48.7 | % | ||||||
Non-GAAP gross margin percentage is calculated by dividing non-GAAP gross margin by net revenues | ||||||||||||
Reconciliation of GAAP to Non-GAAP
operating income: |
||||||||||||
GAAP operating income |
$ | 2,747 | $ | 5,230 | $ | 5,354 | ||||||
Amortization of acquired intangibles and other assets |
| 2,288 | 1,878 | |||||||||
Acquisition and integration related costs |
741 | 800 | | |||||||||
Non-GAAP operating income |
$ | 3,488 | $ | 8,318 | $ | 7,232 | ||||||
Non-GAAP operating income margin percentage |
16.0 | % | 18.5 | % | 17.3 | % | ||||||
Non-GAAP operating income margin percentage is calculated by dividing non-GAAP operating income by net revenues | ||||||||||||
Reconciliation of GAAP to Non-GAAP net income: |
||||||||||||
GAAP net income |
$ | 1,752 | $ | 4,120 | $ | 3,093 | ||||||
Amortization of acquired intangibles and other assets |
| 2,288 | 1,878 | |||||||||
Acquisition and integration related costs |
741 | 800 | | |||||||||
Income tax effect due to Non-GAAP reconciling items
and other differences between the GAAP and
Non-GAAP effective tax rate |
(284 | ) | (1,123 | ) | (502 | ) | ||||||
Non-GAAP net income |
$ | 2,209 | $ | 6,085 | $ | 4,469 | ||||||
Reconciliation of GAAP to Non-GAAP diluted
net income per share: |
||||||||||||
GAAP diluted net income per share |
$ | 0.04 | $ | 0.08 | $ | 0.06 | ||||||
Amortization of acquired intangibles and other assets |
| 0.05 | 0.04 | |||||||||
Acquisition and integration related costs |
0.02 | 0.01 | | |||||||||
Income tax effect due to Non-GAAP reconciling items
and other differences between the GAAP and
Non-GAAP effective tax rate |
(0.01 | ) | (0.02 | ) | (0.01 | ) | ||||||
Non-GAAP diluted net income per share |
$ | 0.05 | $ | 0.12 | $ | 0.09 | ||||||
Shares used in computing diluted net income per share |
48,845 | 49,274 | 49,251 | |||||||||
Assumed effective tax rate Non-GAAP |
35.0 | % | 29.0 | % | 27.0 | % |
Three Months | ||||||||
Ending June 30, 2011 | ||||||||
Low Range | High Range | |||||||
Reconciliation of GAAP to Non-GAAP
diluted net income per share guidance: |
||||||||
GAAP estimate of diluted net income per share |
$ | 0.05 | $ | 0.08 | ||||
Estimated effect on diluted net income per share of: |
||||||||
Amortization of acquired intangibles and other assets |
0.04 | 0.04 | ||||||
Income tax effect due to Non-GAAP reconciling items
and other differences between the GAAP and
Non-GAAP effective tax rate |
(0.01 | ) | (0.01 | ) | ||||
Non-GAAP estimate of diluted net income per share |
$ | 0.08 | $ | 0.11 | ||||
Shares used in computing estimated diluted net income per
share |
49,500 | 49,500 | ||||||
Effective tax rate |
27.0 | % | 27.0 | % |
8