eResearchTechnology, Inc. (ERES)

Q2 2010 Earnings Call Transcript

August 9, 2010 5:00 pm ET

Executives

Michael McKelvey – President and CEO

Keith Schneck – CFO and EVP

Analysts

Raghavan Sarathy – Dougherty & Company

James Terwilliger – Duncan-Williams

David Larson – Leerink Swann

Gene Mannheimer – Auriga

Raymond Myers – Benchmark Company

Mitra Ramgopal – Sidoti

Presentation

Operator

Good afternoon and welcome to the ERT 2010 second quarter results conference call. All participants will be in a listen-only mode. (Operator instructions) Please note that today’s event is being recorded. At this time, I would like to turn the conference call over to Dr. Michael McKelvey.

Dr. McKelvey, please go ahead.

Michael McKelvey

Thank you, Jamie, and good afternoon. Thank you for joining us for ERT’s second quarter 2010 earnings results conference call. A press release announcing the second quarter results was released this afternoon and is available at the ert.com and most financial websites. This press release includes the financial results for one month of our recent acquisition of CareFusion’s Research Services division or RS.

This is a transformative acquisition that we’re very excited about. Joining me today is Keith Schneck, Executive Vice President and Chief Financial Officer.

Prior to beginning the call, I would like to read the forward-looking event statement. Certain statements in today’s call may constitute forward-looking statements concerning the company’s operations, performance, financial conditions, and prospects as well as the RS acquisition and its potential impact on ERT. Because such statements involve known and unknown risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

In addition, anticipated strategic benefits from the acquisition as well as our ability to successfully integrate the operations of RS in ERT may impact future results. Information about these risks and factors that could cause actual results to vary as disclosed in the press release announcing our results and the RS acquisition and in the Risk Factors section of the 2010 Form 10-Q report and our 2009 Form 10-K report.

Guidance is based on management’s good faith expectations given current market conditions, but any further deterioration of general economic conditions in addition to other factors cited elsewhere, could result in the company not achieving the revenue and diluted net income per share figures provided in our guidance.

Our forward-looking statements speak only as of the date made. We do not undertake and expressly disclaim any obligation to update forward-looking statements to reflect events or circumstances after the dates of these statements, except as required by law. You are cautioned not to place undue reliance on our forward-looking statements.

In addition to GAAP financial measures, we used certain non-GAAP financial measures that exclude charges related to amortization of the acquired intangible assets and the acquisition and other costs related to the recent acquisition of RS and related income tax effects. ERT believes that these non-GAAP measures are useful to investors because of the supplemental information facilitates comparisons of its operations from period-to-period and to the performance of other companies within its industry and also assisting gaining a better understanding of its operating results and future prospects. The discussion of the use of non-GAAP measures is contained in the press release that we issued this afternoon.

I will first give highlights for the second quarter and details on new bookings and our operations. Keith will then discuss the detailed financials for the quarter. I will then discuss some strategic directions for ERT as a result of the acquisition of RS. We will then open up the call to questions.

The second quarter saw a fundamental strategic shift in our business. The acquisition of RS has significantly increased market opportunity and has given us a much broader set of products and services to offer to the clinical trial industry. This has enhanced our platform by enabling us to deliver additional products and services in the future.

Specifically, we now have an industry leading suite of products in respiratory diagnostics for clinical trials that encompass the primary respiratory diseases of COPD, asthma, and cystic fibrosis. We have added significant additional capabilities to our ePRO product and service lines by adding a PDA like device called VIAPad as well as a pen based device called VIAPen. We’ve also added a whole new dimension to the products and services that we can offer our own proprietary diagnostic devices for clinical trials.

These devices give us a great land expanded approach to offer and customize product solutions using multiple modalities for the acquisition of important information in clinical trials. We believe this offers us a key strategic competitive advantage in our industry. These devices also support and enable our future strategy of providing products and services into the healthcare industry.

We’ve received a very favorable reactions and clients, investors, and other stakeholders regarding the potentials for this acquisition on our future business, many clients have expressed support for buying multiple services from one vendor, especially vendors with a strong reputation for quality and services that ERT and RS have in the marketplace.

Other advantages cited by clients are bringing together with a combined medical expertise of two of the leading providers of technology and services used in clinical trials, the increased resources that the company can bring, the increased global footprint of the combined company, and the advantages of working with the company whose sole current focus is on clinical trials.

We define legacy RS and legacy ERT as the organizations as they existed prior to May 28. We are providing some details this quarter on financials for those two organizations separately to provide some historical perspective. Going forward, we plan to face out the distinct reporting of these financials as they will become increasingly difficult to separate.

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