eResearchTechnology Reports Third Quarter 2008 Results

Q3 2008 Net Revenues — $33.9 million vs. $24.0 million in Q3 2007 — an increase of 41.5%

Q3 2008 Diluted Net Income per Share — $0.13 vs. $0.07 in Q3 2007 — an increase of 85.7%

Q3 2008 Operating Income margin of 31.1% vs. 22.4% in Q3 2007

Q3 2008 New Bookings of $43.0 million vs. $35.5 million in Q3 2007

PHILADELPHIA, October 30, 2008/PRNewswire-FirstCall/ — eResearchTechnology, Inc. (eRT), (Nasdaq: ERES - News), 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 third quarter and nine-month period ended September 30, 2008.

Financial highlights for the third quarter of 2008 were:

§		Net revenues were $33.9 million, a 41.5% increase from the third quarter of 2007;
§		Diluted net income per share was $0.13, an 85.7% increase from the third quarter of 2007;
§		Gross margin was $19.1 million for a gross margin percentage of 56.3%, compared to 48.0% in the third quarter of 2007. The gross margin included the impact of the operating results of Covance Cardiac Safety Services (CCSS) and the integration of CCSS into eRT. CCSS generated net revenues of $1.9 million from acquired backlog during the third quarter while incurring costs of revenue of $1.7 million, including depreciation and amortization of acquired assets of $680,000;
§		Operating income was $10.5 million, a 96.8% increase from the third quarter of 2007. Operating income margin percentage was 31.1%, compared to 22.4% in the third quarter of 2007. Operating income included a loss of $505,000 from the operations of CCSS and the integration of CCSS into eRT;
§		The Company’s tax rate was 35.8% for the third quarter of 2008, which included the effect of certain tax benefits realized, compared to 37.7% for the third quarter of 2007;
§		New bookings were $43.0 million compared to $35.5 million for the third quarter of 2007, an increase of 21.1%;
§		New bookings included seven new Thorough ECG study agreements, valued at an average of slightly greater than $1 million each;
§		The backlog was $159.2 million, compared to $157.9 million at June 30, 2008.
§		The book-to-bill ratio was 1.3 in the third quarter of 2008, compared to 1.4 in the second quarter of 2008; and
§		eRT ended the third quarter with $62.4 million in cash, cash equivalents, and investments, an increase of $6.5 million from $55.9 million at June 30, 2008. For the three months ended September 30, 2008, net cash provided by operating activities was $8.8 million.

Other recent highlights:

§		The cancellation rate was an annualized 19.6% as compared to 18.1% in the second quarter of 2008. The cancellation rate is calculated as the sum of the actual value of study cancellations plus studies that are completed at amounts under the original contracted amount divided by beginning backlog. The increase in the cancellation rate was caused by a number of long-term projects ending without completion of the full number of contracted ECGs.
§		We successfully completed the integration of the CCSS acquisition with the complete transfer of all operating activities from the CCSS Reno facility into our operations in Philadelphia and Peterborough, UK; and
§		We are on track for the move of our corporate headquarters (and US-based core lab) in Philadelphia to a larger facility, also in Philadelphia, by the end of 2008.

Financial highlights for the first nine months of 2008:

§		For the nine months ended September 30, 2008, the Company reported net revenues of $103.1 million compared to $69.8 million for the nine months ended September 30, 2007, an increase of 47.7%;
§		Net income was $19.3 million, or $0.37 per diluted share, for the nine months ended September 30, 2008 compared to net income of $10.1 million, or $0.20 per diluted share, for the nine months ended September 30, 2007, an increase of 91.6%;
§		Bookings for the nine months ended September 30, 2008 were $142.1 million, which are $3.5 million higher than the bookings of $138.6 recorded for the entire year 2007;
§		The Company’s gross margin percentage for the nine months ended September 30, 2008 was 55.3% compared to 49.9% for the nine months ended September 30, 2007. Operating income margin for the nine months ended September 30, 2008 was 28.9% compared to 21.1% for the nine months ended September 30, 2007;
§		Revenues from acquired backlog of CCSS were $8.2 million and cost of revenues were $7.2 million for the nine months ended September 30, 2008. Operating income during this period included a loss of $2.2 million from the operations of CCSS and the integration of CCSS into eRT;
§		The Company’s tax rate was 37.1% for the nine months ended September 30, 2008 compared to 38.5% for the nine months ended September 30, 2007; and
§		For the nine months ended September 30, 2008, cash provided by operating activities was $26.8 million.

“We continue to be pleased with our results through the third quarter of 2008,” commented Dr. Michael McKelvey, President and CEO of eRT. “Our $33.9 million of revenue for the third quarter reflected the expected sequential decrease from our record $35.5 million in the second quarter 2008 due to slower activity in the summer months and a working down of the CCSS backlog. Through the nine months ending September 30, 2008, revenue, bookings, and net income have all exceeded the levels achieved in all of 2007. As an example, net income through the first nine months of 2008 was 26.8% higher than in the entire 2007 year. We were able to increase our third quarter operating income margin to 31.1% from 30.3% in the second quarter of 2008. Net income for the third quarter was $6.9 million, an increase of 87.0% from $3.7 million for the third quarter of 2007.”

“We continue to execute very well on our projects,” continued Dr. McKelvey. “We completed the integration of the CCSS acquisition, which was a tremendous accomplishment by our staff. Our sales force reports a healthy pipeline of new opportunities, reflecting the continued emphasis on cardiac safety and eRT’s reputation for quality, medical and scientific leadership, project execution, and technology innovation. The pricing environment continues to be stable. In the current economic and financial environment, we feel that our strong balance sheet and cash flow, the continued importance of cardiac safety in clinical trials, and our established reputation for quality, project management, and cost-effective performance will be important contributors to our business going forward.”

2008 Guidance

The Company issued guidance for the full year and fourth quarter of 2008. For the full year 2008, the Company is narrowing its revenue range and expects revenue of between $134.0 million and $137.0 million. The company is raising its guidance for diluted net income per share to between $0.47 to $0.50 for the full year 2008. The company’s revenue guidance for the fourth quarter is between $31.0 to $34.0 million, and its guidance for diluted net income per share for the fourth quarter is between $0.10 and $0.13.

Conference Call

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 October 30, 2008. Interested participants should call 1-866-277-1181 when calling within the United States or 617-597-5358 when calling internationally. Please use pass code 54904519. There will be a playback available until November 6, 2008. To listen to the playback, please call 1-888-286-8010 when calling within the United States or 617-801-6888 when calling internationally. Please use pass code 17782796 for the replay.

This call is being webcast by Thomson Financial and can be accessed at eRT’s web site at www.eRT.com. The webcast may also be accessed at Thomson’s Institutional Investor website at http://phx.corporate-ir.net/playerlink.zhtml?c=119164&s=wm&e=1991822. The webcast can be accessed for up to one year 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 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.

		Contact:
		Keith Schneck		Robert East
		eResearchTechnology, Inc.		Westwicke Partners, LLC
		215-282-5566		410-321-9652

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2007				2008				2007				2008
Net revenues:
Licenses		$	651			$	891			$	2,013			$	2,386
Services			16,453				24,857				47,982				77,510
Site support			6,867				8,182				19,794				23,179
Total net revenues			23,971				33,930				69,789				103,075
Costs of revenues:
Cost of licenses			70				179				199				549
Cost of services			7,567				9,951				21,590				30,948
Cost of site support			4,831				4,698				13,143				14,565
Total costs of revenues			12,468				14,828				34,932				46,062
Gross margin			11,503				19,102				34,857				57,013
Operating expenses:
Selling and marketing			2,487				3,126				8,079				10,259
General and administrative			2,527				4,254				8,915				13,728
Research and development			1,128				1,173				3,155				3,223
Total operating expenses			6,142				8,553				20,149				27,210
Operating income			5,361				10,549				14,708				29,803
Other income, net			584				251				1,703				922
Income before income taxes			5,945				10,800				16,411				30,725
Income tax provision			2,239				3,870				6,318				11,389
Net income		$	3,706			$	6,930			$	10,093			$	19,336
Basic net income per share		$	0.07			$	0.14			$	0.20			$	0.38
Diluted net income per share		$	0.07			$	0.13			$	0.20			$	0.37
Shares used to calculate basic net income per share			50,594				50,856				50,430				50,743
Shares used to calculate diluted net income per share			51,829				52,180				51,681				52,085

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

		December 31, 2007				September 30, 2008
						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	38,082			$	62,326
Short-term investments			8,797				50
Accounts receivable, net			26,718				32,827
Prepaid income taxes			743				—
Prepaid expenses and other			3,087				4,132
Deferred income taxes			901				1,017
Total current assets			78,328				100,352
Property and equipment, net			33,347				27,345
Goodwill			30,908				33,544
Intangible assets			3,849				2,496
Deferred income taxes			1,011				1,999
Other assets			253				589
Total assets		$	147,696			$	166,325
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	3,505			$	3,882
Accrued expenses			12,103				8,481
Income taxes payable			2,352				2,498
Current portion of capital lease obligations			1,097				60
Deferred revenues			13,905				14,377
Total current liabilities			32,962				29,298
Capital lease obligations, excluding current portion			48				—
Other liabilities			1,174				1,075
Total liabilities			34,184				30,373
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 59,138,090 shares issued, respectively			589				591
Additional paid-in capital			87,957				92,313
Accumulated other comprehensive income			1,679				425
Retained earnings			85,477				104,813
Treasury stock, 8,247,119 shares at cost			(62,190	)			(62,190	)
Total stockholders’ equity			113,512				135,952
Total liabilities and stockholders’ equity		$	147,696			$	166,325

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

		Nine Months Ended September 30,
		2007				2008
Operating activities:
Net income		$	10,093			$	19,336
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			11,066				12,519
Cost of sales of equipment			1,004				717
Provision for uncollectible accounts			—				60
Share-based compensation			1,576				1,966
Deferred income taxes			482				(1,151	)
Changes in operating assets and liabilities excluding CCSS acquisition:
Accounts receivable			(3,777	)			(6,601	)
Prepaid expenses and other			(595	)			(1,560	)
Accounts payable			(1,888	)			357
Accrued expenses			1,500				(540	)
Income taxes			2,267				931
Deferred revenues			995				747
Net cash provided by operating activities			22,723				26,781
Investing activities:
Purchases of property and equipment			(10,066	)			(6,966	)
Purchases of investments			(50,108	)			—
Proceeds from sales of investments			48,617				8,747
Payments for acquisition			—				(4,964	)
Net cash used in investing activities			(11,557	)			(3,183	)
Financing activities:
Repayment of capital lease obligations			(1,962	)			(1,085	)
Proceeds from exercise of stock options			1,600				1,502
Stock option income tax benefit			628				839
Net cash provided by financing activities			266				1,256
Effect of exchange rate changes on cash			269				(610	)
Net increase in cash and cash equivalents			11,701				24,244
Cash and cash equivalents, beginning of period			15,497				38,082
Cash and cash equivalents, end of period		$	27,198			$	62,326