DATATRAK third quarter revenue increases 13% to $2.1 million

DATATRAK International, Inc. (OTCQX: DATA), a technology and services company focused on global eClinical solutions for the clinical trials industry, today announced its operating results for the third quarter of 2011.  Highlights include: $2.1 million revenue and continued backlog growth – leading to the highest backlog balance since 2008.

"DATATRAK continues to execute its vision for 2011 – strategic investment to accelerate growth going into 2012," stated Laurence P. Birch, DATATRAK's Chairman of the Board and CEO.  "With a sound, fundamental business model that is driving investments in sales, marketing and product development, we continue to grow backlog while posting strong financial results year-over-year."  

"Increasing sales of multi-year, multi-trial enterprise agreements demonstrate the industry's validation of a unified approach to managing entire drug programs, not just a single trial," Birch continued. "Additionally, our DATATRAK Clinical and Consulting Services™ group continues to be a catalyst in new client acquisition providing DATATRAK with a unique offering to improve trial performance, leveraging our software while filling the data management gaps that all clients face."  

Corporate Highlights:

• Revenue for the third quarter of 2011 of $2.1 million increased 13% over revenue of $1.8 million for the third quarter revenue of 2010 and was consistent with the prior quarter 2011 revenue showing strong growth over previous years
• Revenue for the first nine months of 2011 of $6.1 million increased 13% over revenue of $5.4 million for the same period revenue of 2011
• September 30, 2011 ending backlog of $11.9 million indicates continued growth quarter-over-quarter and the highest balance since 2008
• Cash balance of $2.1 million at September 30, 2011 increased 75% over the $1.2 million cash balance at September 30, 2010
• New contract sales for the third quarter of 2011 of $2.08 million represented an 7% increase over new contract sales of $1.95 million for the same period 2010
• Gross profit margin remained constant at 84% for the third quarter of 2011 compared to 84% for same period in 2010, despite an increased headcount to support DATATRAK's new Clinical and Consulting Services (DCCS) unit
• Strategic Partner NTT DATA solidifies its position as the second leading eClinical vendor in the Japanese market
• Announced addition of Triangle Biostatistics as a Connect Partner, expanding DATATRAK's offering to include statistical consulting and programming services for its clients
• Announced a multi-year consulting agreement with an existing biopharmaceutical client, validating the Company's expansion into the Research Triangle Park (RTP) area under the direction of Dr. Bill Gluck
• Announced a multi-year, multi-study enterprise agreement with a new specialty biologics and vaccines company
• Executed fresh marketing initiatives
  • Kicked-off the DATATRAK Blog, written by DATATRAK employees and Connect Partners, providing continued leadership in the EDC industry
  • Initiated the DATATRAK Unifier, a quarterly newsletter aimed at providing a unifying source of information to clients
• Presented at the 2011 SCDM Annual Conference - Bill O'Mara, Manager Clinical Data Management, on "Clearing the Hurdles of Early Phase CDM'"
• Announced new version of uEDC
  • Custom messages configured to display as part of the Investigator signature process
  • Enhancements to the Coding Manager Export
• Released new version of DATATRAK ONE™ in Simplified Chinese

In addressing the current status of DATATRAK's patent litigation, Mr. Birch stated, "We realize protecting our intellectual property is going to be a long and protracted process; however, with everything that we've learned to date, we remain confident in our position and will vigorously defend our intellectual property.  We believe a number of our competitors infringe.  Despite the tactics of accused infringers that could significantly delay resolution of the dispute, they and their customers remain on notice that if we prevail, our intention is to have them cease infringement."  He continued, "Our perspective on infringement is simple.  We are committed to innovation and encourage competition, but we expect all competitors' technologies to be their own."

Financial Highlights:

Revenue for the third quarter of 2011 increased 13% to $2,051,000 compared to $1,818,000 in the same period of 2010.  The gross profit margin remained stable at 84% for the three months ended September 30, 2011 and September 30, 2010.  The Company's loss from operations for the three months ended September 30, 2011 was $(466,000) compared to income from operations of $53,000 for the corresponding period in the prior year.  The operating loss for the third quarter of 2011 reflects the Company's strategic investments in Sales, Marketing and Software Development to position the 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.

For the three months ended September 30, 2011, the Company recorded other income of $255,000, net of expenses.  The income was an insurance settlement received in the third quarter of 2011 under the Company's Crime Loss/Crime Coverage policies.  The claim arose from suspected fraud and embezzlement believed to have been perpetrated by a former non-executive employee of the Company.  No contingency was recognized in prior quarters due to the short period of time between determination of the insurance company that a valid claim existed and the receipt of the settlement check.  

DATATRAK's backlog at September 30, 2011 was $11.9 million compared to a backlog of $11.2 million at December 31, 2010.  Backlog consists of future value from authorization letters to commence services, statements of work, technology and services agreements, change orders and other customer contracts, billed and unbilled.  Backlog at September 30, 2011 increased over December 31, 2010, despite several studies that were cancelled during the first six months of 2011 due to reasons beyond DATATRAK's control.  Without these unforeseen study cancellations, backlog would have had a more significant increase for the first nine months of 2011 due to increased sales of the company's products and services.  New sales for the first nine months of 2011 outpaced the first nine months of 2010 by 28% and the average value of the sale increased by 28%.  All contracts are subject to possible delays or cancellation or can change in scope in a positive or negative direction.  Therefore, current backlog is not necessarily indicative of the Company's future quarterly or annual revenue.  Historically, backlog has been a poor predictor of the Company's short-term revenue.