(Source: Business Wire)
Phase Forward Incorporated (NASDAQ: PFWD), a leading provider of data management solutions for clinical trials and drug safety, today announced its financial results for the second quarter of 2009.
GAAP revenues for the second quarter of 2009 were $52.5 million, a 29% increase from $40.9 million in the second quarter of 2008. Within total revenues, InForm license, application hosting and other related revenues were $38.2 million, representing 71% of second quarter total non-GAAP revenues and an increase of 23% from $31.1 million in the prior year period.
Bob Weiler, chairman and chief executive officer, remarked, "The company delivered better-than-expected financial results in the second quarter, in addition to renewing and expanding some of our largest customer relationships and launching a major new release of our market-leading EDC solution, InForm GTM. With the growing adoption of EDC and globalization of clinical research, end-user requirements have changed dramatically in recent years. We believe InForm GTM is uniquely positioned to respond to this new user paradigm and support trial management on a global basis."
Weiler added, "Customers are increasingly looking for a broader, end-to-end, integrated clinical research suite (ICRS) from a single, trusted vendor. We believe that Phase Forward has the broadest and deepest ICRS offering in the market place as a result of our market leading EDC solution, combined with our suite of safety solutions, interactive response technologies and clinical data repository and analysis platforms. In addition, our acquisition of Maaguzi's ePRO and late phase solutions rounds out our ICRS offering, while our pending acquisition of Covance's IVRS/IWRS business will add further momentum to our IRT efforts and result in the two largest CROs in the world recommending Phase Forward as their preferred solutions provider. As a result, we are increasingly optimistic about Phase Forward's long-term market opportunity and leadership position."
For the second quarter of 2009, GAAP income from operations was $3.1 million, compared to $4.2 million in the second quarter of 2008. GAAP net income for the period was $2.2 million, or $0.05 per diluted share, compared to $0.08 per diluted share in the second quarter of 2008.
For the second quarter of 2009, non-GAAP revenues were $53.5 million, which excludes a $968,000 purchase accounting adjustment to record assumed acquisition deferred revenues and backlog at fair value. Non-GAAP income from operations was $8.6 million, representing an increase of 34% from the prior year period and a non-GAAP operating margin of 16%. Non-GAAP net income for the period was $5.6 million, or $0.13 per diluted share, representing an increase from non-GAAP net income of $5.2 million, or $0.12 per diluted share, in the second quarter of 2008.
The attached table presents a reconciliation of GAAP to non-GAAP revenues, income from operations and net income and net income per share applicable to common stockholders for the three and six months ended June 30, 2008 and 2009. Non-GAAP results exclude the impact of stock-based compensation expense, amortization of intangible assets associated with acquisitions, the purchase accounting adjustment to record assumed acquisition deferred revenues and backlog at fair value and restructuring expenses.
Total cash, cash equivalents and investments were $168.7 million at the end of the second quarter, compared to $178.1 million at the end of the prior quarter. During the quarter, the company generated $9.2 million in cash flows from operations, while it paid $6.3 million for capital expenditures and approximately $14.0 million for the Waban acquisition. Total deferred revenues were $91.1 million at the end of the quarter, compared to $95.8 million at the end of the prior quarter and $82.7 million at the end of the second quarter of 2008.
Second Quarter and Recent Business Highlights
The company today announced the acquisition of Maaguzi, an innovative provider of internet-based electronic Patient Reported Outcomes (ePRO) and health outcomes study solutions for the life sciences industry.
In July 2009, the company announced that it signed an agreement to purchase the Interactive Voice & Web Response Services (IVRS/IWRS) business of Covance Inc. (NYSE: CVD) for $10.0 million in cash. As part of the transaction, Phase Forward and Covance have also agreed to enter into a multi-year marketing agreement to provide Phase Forward's market leading InForm electronic data capture solution and Clarix interactive response technology as the preferred solutions to Covance clients. Phase Forward expects the purchase, which is subject to customary closing conditions, to be completed by the middle of August 2009.
The company announced the immediate availability of the InForm Global Trial Management (GTM) eClinical solution. Responding to changes in user demands for EDC solutions, InForm GTM provides a completely redesigned interface that sets a new standard for eClinical solutions, and an integrated, unified environment for use in regional and multi-language global trials.
The company continued to enhance its suite of products through the launch of Empirica Study, formerly the Clinical Trials Signal Detection product (CTSD), which helps clinical and safety teams improve their understanding of a product's emerging safety profile during clinical development, and the release of WebSDM Release 3.0 for the validation and review of submission data in CDISC Study Data Tabulation Model (SDTM) format.
The Immune Tolerance Network (ITN) will implement Phase Forward's recently acquired Waban Statistical Computing Environment (SCE), Waban Clinical Data Repository (CDR) and Waban Submission Metadata Manager (SMM) to further their biomarker discovery program. Headquartered at the University of California San Francisco, The Immune Tolerance Network is an international research consortium that aims to accelerate the clinical development of immune tolerance therapies for use in transplantation, autoimmune diseases and allergy and asthma.
The company's CRO-related non-GAAP revenues grew 50% year-over-year during the second quarter. During this period, the company announced an agreement with INC Research for InForm and signed a multi-year, multi-million dollar agreement with Everest Clinical Research Services for InForm and Central Designer.
Financial Outlook
The following statements are based on current expectations and the company assumes no obligation to update or confirm them. These statements are forward-looking and inherently uncertain. Actual results may differ materially as a result of the factors identified below and the factors identified in our public filings made with the Securities and Exchange Commission, or other factors.
For the third quarter of 2009, the company expects non-GAAP revenues to be between $53.0 and $54.5 million, which includes an expected contribution of between $500,000 and $1.3 million related to the recently announced acquisitions of Covance's IVRS/IWRS business and Maaguzi. The company expects non-GAAP operating income to be between $5.5 and $6.2 million. Non-GAAP EPS is expected to be between $0.09 and $0.10. GAAP EPS is expected to be between $0.00 and $0.01, including the purchase accounting adjustments from our acquisitions to record the assumed deferred revenues and backlog at fair value, non-cash expenses associated with stock-based compensation expense and the amortization of intangible assets. The guidance includes approximately $0.02 to $0.03 per share dilution on a non-GAAP basis and approximately $0.04 per share dilution on GAAP EPS basis related to the acquisitions of Covance's IVRS/IWRS business and Maaguzi. The expected EPS reflects an estimated tax rate of approximately 37%.
For the full year 2009, the company expects non-GAAP revenues to be between $214.5 and $217.5 million. This includes an expected contribution of between $2.5 and $3.5 million related to the acquisitions of Covance's IVRS/IWRS business and Maaguzi. On a non-GAAP basis, operating income is expected to be between $30.5 and $32.0 million. The company's non-GAAP EPS guidance is between $0.47 to $0.50, after taking into consideration expected dilution of $0.04 to $0.05 per share related to the Covance IVRS/IWRS business and Maaguzi acquisitions. GAAP EPS is expected to be between $0.17 and $0.20, including expected dilution of $0.07 to $0.08 per share related to the acquisitions of Covance's IVRS/IWRS business and Maaguzi as well as the purchase accounting adjustments from our acquisitions to record the assumed deferred revenues and backlog at fair value, non-cash expenses associated with stock-based compensation expense, the amortization of intangible assets, and restructuring expenses. The expected full year EPS reflects an estimated tax rate of approximately 37%.
Conference Call
The company plans to host its investor conference call today at 5:00 p.m. ET to discuss its financial results for the second quarter 2009 and its outlook for the third quarter and full year 2009. The investor conference call will be available via live webcast on Phase Forward's website at www.phaseforward.com under the tab "Investors." To participate by telephone, the domestic dial-in number is 888-679-8040 and the international dial-in is 617-213-4851. The access code is 87060630. Investors are advised to dial into the call at least ten minutes prior to the call to register. The webcast will be available for replay until Thursday, August 27, 2009 on the "Investors" page of Phase Forward's website.
About Phase Forward
Phase Forward is a leading provider of integrated data management solutions for clinical trials and drug safety. Phase Forward's products and services have been utilized in over 10,000 clinical trials involving more than 1,000,000 clinical trial study participants at over 290 organizations and regulatory agencies worldwide including: AstraZeneca, Boston Scientific, Dana-Farber Cancer Institute, Eli Lilly, the U.S. Food and Drug Administration, GlaxoSmithKline, Harvard Clinical Research Institute, Merck Serono, Novartis, Novo Nordisk, PAREXEL International, Procter & Gamble, Quintiles, sanofi-aventis, Schering-Plough Research Institute, Servier, Tibotec and the U.K. Medicines and Healthcare Products Regulatory Agency. Additional information about Phase Forward is available at www.phaseforward.com.
Cautionary Statement
Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements relating to, among other things, Phase Forward's expectations and assumptions concerning management's forecast of financial performance, the performance of Phase Forward's products and services, future business and operations plans of Phase Forward's customers, the ability of Phase Forward's customers to realize benefits from the use of Phase Forward's products and services, planned acquisitions, integration of acquired businesses, and management's plans, objectives and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond Phase Forward's control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things, changes in our customers' industries; our ability to convince prospective customers to adopt our solutions; competition and changes in competition during future periods; changing customer requirements; governmental regulation; our ability to maintain profitability; fluctuations in our operating results; long sales and implementation cycles; our dependence on a limited number of customers or suppliers; product performance; third party service interruptions or delays; technology failures; our ability to maintain customer relationships and contracts; our ability to retain and hire skilled personnel; our ability to protect our intellectual property rights; product liability or intellectual property infringement claims brought against us; acquisitions; our ability to manage our rapid growth; our ability to obtain capital when desired on favorable terms; and the volatility of the market price of our common stock. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Phase Forward undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. For additional disclosure regarding these and other risks faced by Phase Forward, see the disclosure contained in Phase Forward's public filings with the Securities and Exchange Commission including, without limitation, its most recent Annual Report on Form 10-K.
Non-GAAP Financial Information
Phase Forward provides non-GAAP revenues, income from operations, net income, and net income per share applicable to common stockholders data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Phase Forward's management believes these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the comparable GAAP results, which are attached to this press release.
Phase Forward Incorporated Condensed Consolidated Statements of Income (unaudited) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2008 2009 2008 2009 Revenues: License $ 13,087 $ 14,695 $ 25,701 $ 28,811 Service 27,764 37,806 53,170 72,506 Total revenues 40,851 52,501 78,871 101,317 Costs of revenues: License(2) 626 785 1,281 1,351 Service(1), (2) 17,191 21,245 32,719 41,144 Total cost of revenues 17,817 22,030 34,000 42,495 Gross margin: License 12,461 13,910 24,420 27,460 Service 10,573 16,561 20,451 31,362 Total gross margin 23,034 30,471 44,871 58,822 Operating expenses: Sales and marketing(1), (2) 6,783 8,216 12,934 15,422 Research and development(1) 6,021 9,425 11,579 17,605 General and administrative(1), (2) 6,045 9,715 11,745 17,519 Total operating expenses 18,849 27,356 36,258 50,546 Income from operations 4,185 3,115 8,613 8,276 Other income: Interest income 1,386 502 3,287 1,142 Other, net 115 56 249 465 Total other income 1,501 558 3,536 1,607 Income before provision for income taxes 5,686 3,673 12,149 9,883 Provision for income taxes 1,992 1,446 4,453 3,578 Net income $ 3,694 $ 2,227 $ 7,696 $ 6,305 Net income per share applicable to common stockholders: Basic $ 0.09 $ 0.05 $ 0.18 $ 0.15 Diluted $ 0.08 $ 0.05 $ 0.18 $ 0.14 Weighted average number of common shares used in net income per share calculations: Basic 42,007 42,623 41,933 42,527 Diluted 43,859 44,298 43,798 44,190 (1) Amounts include stock-based compensation expense, as follows: Costs of service revenues $ 448 $ 489 $ 841 $ 965 Sales and marketing 368 462 682 877 Research and development 323 705 602 1,326 General and administrative 853 1,969 1,613 3,026 Total stock-based compensation expense $ 1,992 $ 3,625 $ 3,738 $ 6,194 (2) Amounts include amortization of intangible assets, as follows: Costs of license revenues $ 155 $ 194 $ 310 $ 349 Costs of service revenues - 260 - 521 Sales and marketing 100 354 200 674 General and administrative - 28 - 53 Total amortization of intangible assets $ 255 $ 836 $ 510 $ 1,597 -------------------------------------------------------------------------------
Phase Forward Incorporated Reconciliation of GAAP Revenues, GAAP Income From Operations and GAAP Net Income to Non-GAAP Revenues, Non-GAAP Income From Operations and Non-GAAP Net Income (unaudited) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2008 2009 2008 2009 TOTAL REVENUES: GAAP total revenues $ 40,851 $ 52,501 $ 78,871 $ 101,317 Deferred revenues and backlog adjustments related to acquisitions (1) - 968 - 1,596 Non-GAAP total revenues $ 40,851 $ 53,469 $ 78,871 $ 102,913 INCOME FROM OPERATIONS: GAAP income from operations $ 4,185 $ 3,115 $ 8,613 $ 8,276 Stock-based compensation expense 1,992 3,625 3,738 6,194 Amortization of intangible assets 255 836 510 1,597 Deferred revenues and backlog adjustments related to acquisitions (1) - 968 - 1,596 Restructuring - 86 - 86 Non-GAAP income from operations $ 6,432 $ 8,630 $ 12,861 $ 17,749 NET INCOME: GAAP net income $ 3,694 $ 2,227 $ 7,696 $ 6,305 Stock-based compensation expense, net of tax 1,294 2,199 2,368 3,952 Amortization of intangible assets, net of tax 166 507 323 1,019 Deferred revenues and backlog adjustments related acquisitions, net of tax (1) - 587 - 1,018 Restructuring, net of tax - 52 - 55 Non-GAAP net income $ 5,154 $ 5,572 $ 10,387 $ 12,349 GAAP net income per share applicable to common stockholders: Diluted $ 0.08 $ 0.05 $ 0.18 $ 0.14 Non-GAAP net income per share applicable to common stockholders: Diluted $ 0.12 $ 0.13 $ 0.24 $ 0.28 (1) Fair value adjustments to deferred revenues and backlog. Purchase accounting requires that deferred revenue assumed in an acquisition be recorded and subsequently recognized at its fair value as of the time of the acquisition. Consequently, we do not recognize the full amount of these deferred revenues and backlog. We add back non-GAAP revenues associated with deferred revenues and backlog that were excluded as a result of purchase accounting adjustments, as we believe that this provides information about the operating impact of the acquired business in a manner consistent with the revenue recognition for our pre-existing products and services. -------------------------------------------------------------------------------
Phase Forward Incorporated Condensed Consolidated Balance Sheets (unaudited) (in thousands, except per share amounts) As of December 31, As of June 30, 2008 2009 Assets Current assets: Cash and cash equivalents $ 131,550 $ 94,721 Restricted cash, current portion 500 - Short-term investments 27,893 43,882 Accounts receivable, net of allowance of $578 and $655, respectively 39,999 40,516 Acquired future billings, current portion 1,129 924 Deferred set up costs, current portion 2,393 2,878 Prepaid commissions and royalties, current portion 4,524 5,266 Prepaid expenses and other current assets 4,773 4,539 Deferred income taxes, current portion 12,895 11,171 Securities settlement agreement - 5,336 Total current assets 225,656 209,233 Acquired future billings, net of current portion 962 502 Property and equipment, net 36,615 42,170 Deferred set up costs, net of current portion 1,630 1,833 Prepaid commissions and royalties, net of current portion 4,277 5,180 Intangible assets, net of accumulated amortization of $3,624 and $5,220 respectively 27,586 34,895 Goodwill 39,125 47,099 Deferred income taxes, net of current portion 7,107 4,170 Restricted cash, net of current portion 962 962 Long-term investments 18,022 30,077 Securities settlement agreement 5,322 - Other assets 626 749 Total assets $ 367,890 $ 376,870 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 8,895 $ 6,137 Accrued expenses 22,686 18,172 Leasehold incentive obligation, current portion 791 791 Deferred revenues, current portion 79,918 82,527 Total current liabilities 112,290 107,627 Deferred rent, net of current portion 564 1,739 Leasehold incentive obligation, net of current portion 7,248 6,852 Deferred revenues, net of current portion 8,600 8,588 Other long-term liabilities 1,515 1,535 Total liabilities 130,217 126,341 Stockholders' equity: Preferred stock, $0.01 par value: Authorized-----5,000 shares Issued-----0 shares - - Common stock, $0.01 par value: Authorized-----100,000 shares Issued----- 42,986 and 43,255 shares, respectively 430 433 Additional paid-in capital 283,676 289,630 Treasury stock, 37 shares at cost (111 ) (111 ) Accumulated other comprehensive loss (672 ) (78 ) Accumulated deficit (45,650 ) (39,345 ) Total stockholders' equity 237,673 250,529 Total liabilities and stockholders' equity $ 367,890 $ 376,870 -------------------------------------------------------------------------------
Phase Forward Incorporated Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Six Months Ended June 30, 2008 2009 Operating activities Net income $ 7,696 $ 6,305 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,492 7,699 Stock-based compensation expense 3,738 6,194 Loss on disposal of fixed assets 317 - Amortization of leasehold incentive obligation - (396 ) Provision for allowance for doubtful accounts 71 174 Deferred income taxes 4,328 2,240 Amortization of discounts or premiums on investments (125 ) 100 Change in fair value of long-term investments - (464 ) Change in fair value of securities settlement agreement - (14 ) Changes in assets and liabilities: Accounts receivable and acquired future billings 7,235 518 Deferred costs A service of YellowBrix, Inc.
