-- Revenue of $34.9 million increases 24% over prior year
-- Non-GAAP operating income of $5.4 million increases 37% over
prior year
WALTHAM, Mass.--(BUSINESS WIRE)--Oct. 23, 2007--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 third quarter of 2007.
Revenues for the third quarter of 2007 were $34.9 million, a 24%
increase from $28.0 million in the third quarter of 2006. Within total
revenues, InForm(TM) license, application hosting and other related
revenues were $25.5 million, an increase of 29% from $19.7 million in
the prior year period, representing 73% of third quarter 2007 total
revenues.
Bob Weiler, chief executive officer and president, remarked, "We
are extremely pleased with the company's performance during the third
quarter, which was highlighted by strong revenue and profitability
growth. Phase Forward's proven customer success and referenceability
continue to be significant differentiators, and they were key factors
in major electronic data capture (EDC) wins during the third quarter
with customers such as Eisai and Novartis Vaccines."
Weiler added, "During the quarter Eli Lilly, a top 10
pharmaceutical company adopted Phase Forward's advanced safety
solutions after realizing the business benefits of our InForm EDC
solution. We believe customers will look to purchase integrated EDC
and safety solutions from a single vendor when considering a long-term
strategy, and that Phase Forward's leadership ranking in both of these
areas positions it well to capitalize on this trend. We continue to be
encouraged by demand levels for EDC, which is reflected by our strong
third quarter results and increased guidance for the full year."
For the third quarter of 2007, GAAP income from operations was
$4.1 million, compared to $2.8 million in the third quarter of 2006.
GAAP net income for the third quarter of 2007 was $5.7 million, or
$0.13 per diluted share, compared to $2.9 million, or $0.08 per
diluted share, in the third quarter of 2006.
For the third quarter of 2007, non-GAAP income from operations was
$5.4 million, representing a margin of 15.6% and an increase of 37%
from the prior year period. Non-GAAP net income was $6.9 million, or
$0.16 per diluted share, for the third quarter of 2007. This
represented an increase of 69% from non-GAAP net income of $4.1
million, or $0.11 per diluted share, in the third quarter of 2006.
The attached table presents a reconciliation of GAAP to non-GAAP
income from operations and net income and net income per share
applicable to common stockholders for the third quarter of 2007 and
2006.
Cash, cash equivalents and short-term investments were $187
million at the end of the third quarter, an increase of $7.6 million
from $179.4 million at the end of the prior quarter. Total deferred
revenue was $60 million at the end of the quarter, down $1.5 million
sequentially and an increase of $11.9 million on a year-over-year
basis.
Business Highlights
-- Eisai Medical Research, a U.S. pharmaceutical subsidiary of
Tokyo-based Eisai Co., signed a license and services agreement
with Phase Forward for the implementation and use of the
company's InForm EDC solution.
-- Schering-Plough Research Institute (SPRI) signed a multi-year,
multi-million dollar renewal of their InForm EDC license,
added coverage for Japan and purchased additional modules.
-- Novartis Vaccines signed a multi-million dollar license,
hosting and services agreement with Phase Forward for the
implementation and use of the company's InForm EDC solution.
-- Phase Forward continued to make progress executing its
strategy to broaden and deepen its relationships with Contract
Research Organizations (CROs) and academic research centers
around the globe. During the quarter, the company expanded its
relationships with MedPace, Imperial College and SGS for the
use of its InForm solution.
-- Phase Forward announced a multi-year alliance agreement with
AAIPharma, Inc., a leading global CRO with operations
throughout the United States, Canada, Western and Eastern
Europe and South America. AAIPharma plans to offer services
centered around Phase Forward's InForm EDC solution and its
Clintrial (TM) clinical data management product.
Financial Outlook
The following statements are based on current expectations as of
the date of this press release 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 the
company's public filings made with the Securities and Exchange
Commission, or other factors.
For the fourth quarter of 2007, the company expects revenues to be
between $36.0 and $36.8 million. The company expects non-GAAP
operating income to be between $5.2 and $5.6 million, with non-GAAP
EPS between $0.15 and $0.16. GAAP EPS is expected to be between $0.12
and $0.13, including non-cash expenses associated with stock-based
compensation expense and the amortization of intangible assets.
For the full year 2007, the company expects revenues to be between
$132.5 and $133.3 million and bookings to be between $180 and $190
million. On a non-GAAP basis, operating income is expected to be
between 14.5% and 15%, with non-GAAP EPS between $0.58 and $0.59. GAAP
EPS is expected to be between $0.46 and $0.47, including non-cash
expenses associated with stock-based compensation expense and the
amortization of intangible assets.
Conference Call
The company plans to host its investor conference call today at
5:00 pm EST to discuss its financial results for the third quarter of
2007 and its outlook for the fourth quarter of and full year 2007. The
investor conference call will be available via live web cast on Phase
Forward's web site at www.phaseforward.com under the tab "Investors."
To participate by telephone, the domestic dial-in number is
888-679-8035 and the international dial-in is 617-213-4848. The access
code is 54496615. 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 Friday, November 30, 2007 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. The company offers
proven solutions for electronic data capture (InForm(TM)), clinical
data management (Clintrial(TM)), clinical trials signal detection
(CTSD(TM)), strategic pharmacovigilance (WebVDME(TM) and Signal
Management), adverse event reporting (Clintrace(TM)) and applied data
standards (WebSDM(TM)). In addition, the company provides services in
the areas of application implementation, hosting and validation, data
integration, business process optimization, safety data management and
industry standards. 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 250 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, 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 Quarterly Report on Form 10-Q.
Non-GAAP Financial Information
Phase Forward provides non-GAAP 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 and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2007 2006 2007
--------- -------- -------- --------
Revenues:
License $ 11,225 $12,924 $29,633 $35,429
Service 16,824 21,952 46,754 61,065
-------- -------- -------- --------
Total revenues 28,049 34,876 76,387 96,494
Costs of revenues:
License 717 552 2,020 1,686
Service(1) 10,079 13,561 27,981 37,447
-------- -------- -------- --------
Total cost of revenues 10,796 14,113 30,001 39,133
Gross margin:
License 10,508 12,372 27,613 33,743
Service 6,745 8,391 18,773 23,618
-------- -------- -------- --------
Total gross margin 17,253 20,763 46,386 57,361
-------- -------- -------- --------
Operating expenses:
Sales and marketing(1) 5,377 6,509 14,798 17,731
Research and
development(1) 4,538 5,066 12,022 14,620
General and
administrative(1) 4,551 5,084 13,138 14,509
-------- -------- -------- --------
Total operating expenses 14,466 16,659 39,958 46,860
-------- -------- -------- --------
Income from operations 2,787 4,104 6,428 10,501
Other income (expense):
Interest income 735 2,362 2,010 4,758
Other, net 14 (91) (50) (153)
-------- -------- -------- --------
Total other income 749 2,271 1,960 4,605
-------- -------- -------- --------
Income before provision for
income taxes 3,536 6,375 8,388 15,106
Provision for income taxes 642 657 1,520 1,579
-------- -------- -------- --------
Net income $ 2,894 $ 5,718 $ 6,868 $13,527
======== ======== ======== ========
Net income per share applicable
to common stockholders:
Basic $ 0.08 $ 0.14 $ 0.20 $ 0.36
======== ======== ======== ========
Diluted $ 0.08 $ 0.13 $ 0.19 $ 0.34
======== ======== ======== ========
Weighted average number of
common shares used in net
income per share
calculations:
Basic 35,147 41,238 34,386 37,643
======== ======== ======== ========
Diluted 36,620 43,397 35,921 39,659
======== ======== ======== ========
(1) Amounts include stock-based
compensation expense, as
follows:
Costs of service revenues $ 68 $ 102 $ 161 $ 330
Sales and marketing 143 201 351 570
Research and development 121 181 248 516
General and
administrative 644 652 1,231 1,917
-------- -------- -------- --------
Total stock-based
compensation expense $ 976 $ 1,136 $ 1,991 $ 3,333
======== ======== ======== ========
Phase Forward Incorporated and Subsidiaries
Tables of Reconciliation from GAAP to Non-GAAP
(unaudited)
(in thousands, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- ----------------
2006 2007 2006 2007
------- ------- ------- --------
Reconciliation of GAAP to Non-GAAP
income from operations:
GAAP income from operations $2,787 $4,104 $6,428 $10,501
Stock-based compensation expense 976 1,136 1,991 3,333
Amortization of intangible assets 218 202 653 637
------- ------- ------- --------
Non-GAAP income from operations $3,981 $5,442 $9,072 $14,471
======= ======= ======= ========
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- ----------------
2006 2007 2006 2007
------- ------- ------- --------
Reconciliation of GAAP to Non-GAAP net
income and net income per share
applicable to common stockholders:
GAAP net income $2,894 $5,718 $6,868 $13,527
Stock-based compensation expense,
net of tax 976 1,019 1,991 2,985
Amortization of intangible assets,
net of tax 218 181 653 570
------- ------- ------- --------
Non-GAAP net income $4,088 $6,918 $9,512 $17,082
======= ======= ======= ========
GAAP net income per share applicable
to common stockholders:
Diluted $ 0.08 $ 0.13 $ 0.19 $ 0.34
======= ======= ======= ========
Non-GAAP net income per share
applicable to common stockholders:
Diluted $ 0.11 $ 0.16 $ 0.26 $ 0.43
======= ======= ======= ========
Phase Forward Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except per share amounts)
December 31, September 30,
2006 2007
------------ -------------
Assets
Current assets:
Cash and cash equivalents $ 42,169 $ 157,134
Short-term investments 27,466 29,832
Accounts receivable, net of allowance of
$384 and $426 in 2006 and 2007,
respectively 29,652 27,990
Deferred set up costs, current portion 1,649 2,201
Prepaid commissions and royalties,
current portion 3,570 4,865
Prepaid expenses and other current assets 2,972 3,691
Deferred income taxes 5,158 5,150
------------ -------------
Total current assets 112,636 230,863
------------ -------------
Property and equipment, net 8,561 12,023
Deferred set up costs, net of current
portion 1,000 1,263
Prepaid commissions and royalties, net of
current portion 2,670 3,205
Intangible assets, net of accumulated
amortization of $1,176 and $1,814 in
2006 and 2007, respectively 2,724 2,086
Goodwill 27,820 27,268
Deferred income taxes 4,988 4,569
Other assets 252 259
------------ -------------
Total assets $ 160,651 $ 281,536
============ =============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 2,893 $ 2,497
Accrued expenses 14,183 18,070
Accrued earn-out 3,500 3,500
Deferred revenue, current portion 47,128 56,731
Deferred rent, current portion 352 417
------------ -------------
Total current liabilities 68,056 81,215
------------ -------------
Deferred revenues, net of current portion 3,527 3,273
Deferred rent, net of current portion 596 70
Other long-term liabilities 451 -
------------ -------------
Total liabilities 72,630 84,558
------------ -------------
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized-----5,000 shares
Issued-----0 shares - -
Common stock, $.01 par value:
Authorized-----100,000 shares
Issued-----35,529 and 42,319
shares in 2006 and 2007,
respectively 355 423
Additional paid-in capital 176,545 271,179
Treasury stock, 37 shares at cost (111) (111)
Accumulated other comprehensive (loss)
income (72) 656
Accumulated deficit (88,696) (75,169)
------------ -------------
Total stockholders' equity 88,021 196,978
------------ -------------
Total liabilities and stockholders' equity $ 160,651 $ 281,536
============ =============
Phase Forward Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Nine Months Ended
September 30,
-------------------
2006 2007
--------- ---------
Operating activities
Net income $ 6,868 $ 13,527
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,809 4,930
Stock-based compensation expense 1,991 3,333
Loss on disposal of fixed assets 51 -
Foreign currency exchange loss 45 160
Provision for allowance for doubtful accounts 79 75
Deferred income taxes (206) (4,554)
Tax benefit related to exercise of options (1,027) -
Non-cash income tax expense 1,329 5,410
Amortization of premiums or discounts on
short-term investments 39 57
Changes in assets and liabilities:
Accounts receivable 2,361 2,012
Deferred costs (512) (2,498)
Prepaid expenses and other current assets (398) (658)
Accounts payable (225) (437)
Accrued expenses 451 3,337
Accrued litigation settlement (8,500) -
Deferred revenue 1,687 9,359
Deferred rent (472) (452)
--------- ---------
Net cash provided by operating activities 7,370 33,601
--------- ---------
Investing activities
Proceeds from maturities of short-term investments 29,163 60,172
Purchase of short-term investments (44,186) (62,594)
Purchase of property and equipment (3,502) (7,707)
Payment on earn-out under acquisition (2,000) -
(Increase) decrease in other assets (32) 1
--------- ---------
Net cash used in investing activities (20,557) (10,128)
--------- ---------
Financing activities
Net proceeds from issuance of common stock 2,332 91,369
Tax benefit related to exercise of options 1,027 -
--------- ---------
Net cash provided by financing activities 3,359 91,369
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (174) 123
--------- ---------
Net change in cash and cash equivalents (10,002) 114,965
Cash and cash equivalents at beginning of period 51,779 42,169
--------- ---------
Cash and cash equivalents at end of period 41,777 157,134
Short-term investments at end of period 23,791 29,832
--------- ---------
Total cash, cash equivalents and short-term
investments at end of period $ 65,568 $186,966
========= =========
Non-cash investing activities
Accrued earn-out in connection with acquisition of
Lincoln Technologies, Inc. $ 3,500 $ -
========= =========
CONTACT: Public Relations:
Phase Forward
Gretchen Dock, 781-902-4413
Gretchen.dock@phaseforward.com
or
Investor Relations:
Integrated Corporate Relations
Timothy Dolan, 617-956-6727
timothy.dolan@icrinc.com
SOURCE: Phase Forward Incorporated
