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Press Release

SOURCE: eResearchTechnology, Inc.

eResearchTechnology Reports Second Quarter 2007 Results

eResearchTechnology Reports EPS of $0.08 vs. $0.03 in Q2 2006
Q2 Revenues Increase to $24.7 Million and New Bookings Increase to $34.5 Million

PHILADELPHIA, August 2, 2007/PRNewswire-FirstCall/ — eResearchTechnology, Inc. (eRT), (Nasdaq: ERES - News), a leading provider of centralized ECG and eClinical technology and services to the pharmaceutical, biotechnology, medical device and related industries, announced today results for the second quarter and six-month period ended June 30, 2007.

The Company reported revenues of $24.7 million for the second quarter of 2007, a sequential increase of 17.3% from $21.1 million in the first quarter of 2007 and an 8.4% increase from $22.8 million in the second quarter of 2006. The Company reported net income of $4.1 million for the second quarter of 2007, a sequential increase of 84.1% from the first quarter of 2007 and a 146.8% increase from $1.7 million in the second quarter of 2006. This resulted in net income per diluted share of $0.08 in the second quarter of 2007, compared to $0.04 in the first quarter of 2007 and $0.03 in the second quarter of 2006.

The Company’s gross margin percentage in the second quarter of 2007 was 53.9% compared to 47.6% in the first quarter of 2007 and 46.7% in the second quarter of 2006. Pre-tax income margin in the second quarter of 2007 was 27.6% compared to 17.3% in the first quarter of 2007 and 12.3% in the second quarter of 2006. The Company’s tax rate for the second quarter of 2007 was 39.3% compared to 40.1% in the second quarter of 2006.

For the six months ended June 30, 2007, the Company reported revenues of $45.8 million compared to $44.2 million for the six months ended June 30, 2006. eRT reported net income of $6.4 million, or $0.12 per diluted share, for the six months ended June 30, 2007 compared to net income of $3.6 million, or $0.07 per diluted share, for the six months ended June 30, 2006.

The Company’s gross margin percentage for the six months ended June 30, 2007 was 51.0% compared to 49.0% for the six months ended June 30, 2006. Pre-tax income margin for the six months ended June 30, 2007 was 22.8% compared to 13.6% for the six months ended June 30, 2006. The Company’s tax rate was 39.0% for the six months ended June 30, 2007 compared to 40.1% for the six months ended June 30, 2006.

eRT ended the quarter with $63.4 million in cash, cash equivalents and investments, an increase of $0.9 million from $62.5 million at the end of the first quarter of 2007.

“The Company demonstrated strong growth both sequentially and compared to the second quarter of the prior year,” commented Dr. Michael McKelvey, President and CEO of eRT. “We were particularly pleased with the strong growth shown in our core services business (which is predominately cardiac safety). Services net revenues increased 25.7% sequentially from last quarter, and 37.0% compared to the second quarter of last year. This was offset by a reduction in equipment sales and eClinical revenues compared to both last quarter and the second quarter of last year. This quarter we improved our gross margin and pre-tax income margin percentage by 630 and 1030 basis points, respectively, from the first quarter of 2007. The gains from the second

quarter of 2006 were even more pronounced. This demonstrates the leverage of our gross margin and pre-tax income as we increase our revenue and we continue to focus on improving the efficiency of our operations. We were also very pleased with the strong increase in our new bookings in the quarter, as well as the increase in our backlog.”

Highlights of the second quarter included:

*		$34.5 million in new bookings of contracts and work orders;

*		Eight new Thorough ECG study agreements were signed, valued at approximately $8.7 million, translating into an average Thorough ECG study size of more than $1 million.

*		Backlog increased to $106.8 million as of June 30, 2007. This was an increase of $5.4 million from March 31, 2007, a 23.3% annualized increase. The annualized cancellation rate was 17.6%.

*		The book-to-bill ratio for the second quarter was 1.58 based on an average of the last three quarters’ revenue, and 1.40 based on the second quarter revenue.

*		A new line of business, — electronic patient reported outcomes (ePRO) — was launched with the establishment of a long-term strategic relationship with Healthcare Technology Systems, Inc. (HTS), a leading authority in the research, development and validation of computer administered clinical rating instruments. The strategic relationship includes the exclusive licensing (subject to one pre-existing license agreement) of 57 interactive voice response (IVR) clinical assessments offered by HTS, along with HTS’ IVR system and five-year consulting agreements with Drs. John Greist, James (Jeff) Jefferson, and David Katzelnick — pioneers in the electronic assessment of patient outcomes in clinical research studies.

Dr. McKelvey continued, “During the quarter we made meaningful progress on our strategic plan. The creation of the eRT Consulting Group has resulted in additional revenue and, more importantly, an increased recognition by our clients of the value of a one-stop experience for the cardiac safety component of clinical trials. The strategic investment we are making in international sales is paying off, as evidenced by the strong showing of international bookings in the quarter (39% of total cardiac safety bookings). In addition, our marketing investment has yielded a number of new leads and opportunities. Our cost efficiency program, implemented in February, has contributed to our improved margins. We have completed the first stage of investment in our eClinical suite. Finally, the strategic transaction with HTS to initiate our ePRO business has received favorable market reaction and we are excited about the contributions this business will make in the future.”

2007 Guidance

The Company issued guidance for the third quarter of 2007. eRT anticipates revenues of between $24 million and $26 million and net income per diluted share of $0.07 to $0.09 for the third quarter ending September 30, 2007. For the full year ending December 31, 2007, management anticipates revenues being within the midpoint of the previously issued guidance of $95 million and $103 million. Management anticipates net income per diluted share to be at the high end of the previously issued guidance of $0.25 to $0.30.

Conference Call

Dr. McKelvey and Richard Baron, the Company’s Chief Financial Officer, will hold a conference call to discuss these results. The conference call will take place at 4:30 p.m. EDT on August 2, 2007. For the conference call interested participants should dial 888-469-4228 when calling within the United States or 480-629-9564 when calling internationally. There will be a playback available through 11:59 p.m. (Eastern) on August 16. To listen to the playback, please call 800-406-7325 when calling within the United States or 303-590-3030 when calling internationally. Please use pass code 3762560 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=00004239. The webcast can be accessed until September 2, 2007 on either site.

About eResearchTechnology, Inc.

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, 2007 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 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.


Contact:
Richard Baron		Brett Maas
eResearchTechnology, Inc.		Hayden Communications
215-282-5566		646-536-7331

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2007		2006		2007
Net revenues:
Licenses	$	1,096	$	580	$	1,734	$	1,362
Services		12,822		17,561		27,547		31,529
Site support		8,900		6,593		14,936		12,927


Total net revenues		22,818		24,734		44,217		45,818


Costs of revenues:
Cost of licenses		77		63		153		129
Cost of services		6,300		7,233		12,456		14,023
Cost of site support		5,791		4,117		9,944		8,312


Total costs of revenues		12,168		11,413		22,553		22,464


Gross margin		10,650		13,321		21,664		23,354


Operating expenses:
Selling and marketing		3,178		3,054		6,216		5,592
General and administrative		3,974		2,919		7,813		6,388
Research and development		1,034		1,102		2,348		2,027


Total operating expenses		8,186		7,075		16,377		14,007


Operating income		2,464		6,246		5,287		9,347
Other income, net		338		569		728		1,119


Income before income taxes		2,802		6,815		6,015		10,466
Income tax provision		1,125		2,676		2,414		4,079


Net income	$	1,677	$	4,139	$	3,601	$	6,387


Basic net income per share	$	0.03	$	0.08	$	0.07	$	0.13


Diluted net income per share	$	0.03	$	0.08	$	0.07	$	0.12


Shares used to calculate basic net income per share		49,266		50,493		49,184		50,346


Shares used to calculate diluted net income per share		51,515		51,782		51,600		51,606

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


	December 31, 2006			June 30, 2007
				(unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	15,497		$	19,896
Short-term investments		41,416			42,533
Accounts receivable, net		17,866			20,205
Prepaid income taxes		2,819			740
Prepaid expenses and other		2,761			3,766
Deferred income taxes		912			912

Total current assets		81,271			88,052

Property and equipment, net		31,129			35,731
Goodwill		1,212			1,212
Long-term investments		928			932
Other assets		524			381


Total assets	$	115,064		$	126,308


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	4,360		$	2,634
Accrued expenses		3,445			3,838
Income taxes payable		781			1,249
Current portion of capital lease obligations		40			2,193
Deferred revenues		11,325			10,722

Total current liabilities		19,951			20,636

Capital lease obligations, excluding current portion		—			324
Deferred tax liabilities		1,491			1,900


Total liabilities		21,442			22,860


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, 58,356,546 and 58,820,938 shares issued, respectively		584			588
Additional paid-in capital		83,493			86,699
Accumulated other comprehensive income		1,510			1,739
Retained earnings		70,225			76,612
Treasury stock, 8,247,119 shares at cost		(62,190	)		(62,190	)


Total stockholders’ equity		93,622			103,448


Total liabilities and stockholders’ equity	$	115,064		$	126,308

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


	Six Months Ended June 30,
	2006			2007
Operating activities:
Net income	$	3,601		$	6,387
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,772			7,139
Cost of sales of equipment		2,612			535
Non-cash share-based compensation		1,643			1,142
Changes in operating assets and liabilities:
Accounts receivable		960			(2,269	)
Prepaid expenses and other		(961	)		(245	)
Accounts payable		1,458			(2,184	)
Accrued expenses		(823	)		382
Income taxes		(2,332	)		2,259
Deferred revenues		(5,788	)		(647	)

Net cash provided by operating activities		6,142			12,499


Investing activities:
Purchases of property and equipment		(10,007	)		(7,995	)
Purchases of investments		(18,720	)		(40,651	)
Proceeds from sales of investments		14,640			39,530

Net cash used in investing activities		(14,087	)		(9,116	)


Financing activities:
Repayment of capital lease obligations		(75	)		(1,132	)
Proceeds from exercise of stock options		2,062			1,462
Stock option income tax benefit		2,365			578
Repurchase of common stock for treasury		(5,803	)		—

Net cash (used in) provided by financing activities		(1,451	)		908


Effect of exchange rate changes on cash		144			108


Net (decrease) increase in cash and cash equivalents		(9,252	)		4,399
Cash and cash equivalents, beginning of period		18,432			15,497


Cash and cash equivalents, end of period	$	9,180		$	19,896

eResearch Technology, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Information
For the Three and Six Months Ended June 30, 2006 and 2007
(in thousands)
(unaudited)


	Three Months				Six Months
	Ended June 30				Ended June 30
	2006		2007		2006		2007
Gross margin:
GAAP gross margin	$	10,650	$	13,321	$	21,664	$	23,354
		—		—		—		—

Non-GAAP income gross margin	$	10,650	$	13,321	$	21,664	$	23,354


Reconciliation of GAAP to Non-GAAP operating income:
GAAP operating income	$	2,464	$	6,246	$	5,287	$	9,347

Cost of efficiency improvements		—		—		—		676
CEO and CFO transition		731		—		1,200		—
Settlement of contract dispute		—		—		646		—

Subtotal of reconciling items		731		—		1,846		676

Non-GAAP operating income	$	3,195	$	6,246	$	7,133	$	10,023


Reconciliation of GAAP to Non-GAAP net income and net income per diluted share:
GAAP net income	$	1,677	$	4,139	$	3,601	$	6,387

Cost of efficiency improvements		—		—		—		412
CEO and CEO transition		438		—		718		—
Settlement of contract dispute		—		—		387		—

Subtotal of reconciling items		438		—		1,105		412

Non-GAAP net income	$	2,115	$	4,139	$	4,706	$	6,799

GAAP net income per diluted share	$	0.03	$	0.08	$	0.07	$	0.12

Non-GAAP net income per diluted share	$	0.04	$	0.08	$	0.09	$	0.13