DATATRAK Sees 50% Increase in New Clients in 2011
Ken Nagy, CFA
On March 15, 2012, DATATRAK International, Inc. (DATA), the Mayfield Heights, Ohio based technology and service provider of electronic clinical trial technology solutions for the clinical trials industry, reported financial results for its fiscal 2011 fourth quarter and fiscal year, ended December 31, 2011.
The Company reported mixed results with fourth quarter revenues falling nearly 8 percent year over year to $1.854 million, compared to $2.014 million for the three months ended December 31, 2010.
The drop in fourth quarter revenues was primarily due to study cancellations from earlier in the year.
Operating loss for the three months was $426,048 compared to operating income of $422,693 for the three months ended December 31, 2010.
Still, it should be noted that the Company’s operating loss for the fourth quarter of 2011 reflects DATATRAK's strategic investments in Sales, Marketing and Software Development to position its business for further growth, the additions to DATATRAK's Clinical and Consulting Services and the accrual of management incentive plan awards, as well as costs incurred to protect the Company's intellectual property for its customers and partners.
During the quarter ended December 31, 2011, DATATRAK fell to a net loss of $434,188 from net income of $18,431 for the fourth quarter fiscal 2010.
The drop from net income to a net loss was primarily a result of slightly lower revenues, lower gross margin and an increase in selling, general and administrative expense.
Selling, general and administrative expense increased year over year by 14.8 percent or $244,683 to $1.896 million while gross margin for the fourth quarter fiscal 2011 dropped to 81.5 percent compared to 85.1 percent for the comparable quarter of 2010.
Based on a weighted average number of diluted shares of 14.563 million, diluted net loss per share resulted in a net loss of $0.03 per share for the fourth quarter of fiscal 2012. This compared to diluted net income per share of $0.00 based on a weighted average number of diluted shares of 14.528 million during the three months ended December 31, 2010.
While fourth quarter results were mediocre, it should be mentioned that the Company’s investment in strategic initiatives resulted in the largest software release in the Company’s history, including new products and entrance into a new $1 billion CTMS market for DATATRAK.
For the year ended December 31, 2011, year over year revenues improved by 7.3 percent to $7.926 million from $7.390 million for the comparable twelve months of fiscal 2010.
Still, despite several studies that were cancelled during the first half of 2011, DATATRAK reported an ending backlog of $11.6 million as of December 31, 2011 compared to $11.2 at December 31, 2010, reflecting continued year-over-year growth for the third consecutive year.
However, operating loss for the full year was $1.243 million compared to operating income of $113,469 for the fiscal year ended December 31, 2010.
Here again, it should be noted that the Company’s operating loss for fiscal 2011 reflects DATATRAK's strategic investments in Sales, Marketing and Software Development to position its business for further growth, the addition of DATATRAK's clinical and consulting services, the accrual of management incentive plan awards, as well as costs incurred to protect the Company's intellectual property for its customers and partners.
Still, the Company reported a net loss for fiscal 2011 of $1.006 million compared to net income of $101,109 for the twelve months ended December 31, 2010.
Here again, the fall from net income to a net loss was primarily a result of lower gross margin and an increase in selling, general and administrative expense offset by higher revenues.
Selling, general and administrative expense increased year over year by 25.3 percent or $1.543 million to $7.642 million while gross margin for fiscal 2011 dropped to 82.8 percent compared to 84.2 percent for fiscal 2010.
Based on a weighted average number of diluted shares of 14.382 million, diluted net loss per share resulted in a $0.07 loss per share for the full year ended December 31, 2011. This compared to diluted net income per share of $0.01 based on a weighted average number of diluted shares of 13.833 million during the twelve months ended December 31, 2010.
Still, 2011 reflected a 50% increase in the number of new clients and a 267% increase in the number of new CROs partners, resulting in year over year new contract sales outpacing 2010 by 15% and 2009 new contract sales by 130%.
The Company’s end of year cash balance improved year over year with cash and investments shooting to $2.298 million, resulting in its highest cash balance in three years. This compares to cash and investments of $1.026 million as of December 31, 2010.
Likewise, although total assets improved year over year from $2.686 million to $3.668 million, DATATRAK’s stockholders deficit increased to $1.182 million compared to a deficit of $978,121 for the period ended December 31, 2010.
Finally, while the Company stated that the drug and device industries continues to face pressures related to patent overhangs, the lingering global recession, increased regulation and reduced research budgets, a non-dilutive cash infusion mid-year allowed DATATRAK to continue to fund growth initiatives, which the Company believes are already resulting in higher than expected new contracts in the first quarter of fiscal 2012.
To view a free copy of our most recent research report on DATA or subscribe to our daily morning email alert, visit Ken Nagy's coverage page at http://scr.zacks.com/.
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