Morrisville, N.C.-based eClinical company etrials’ third quarter revenue fell and its loss widened amid deep restructuring and organizational changes planned for the next two to three quarters. The company is trying to climb its way to profitability and improve its service delivery issues.
“Last quarter, we began to re-engineer etrials’ operations and transition the company into a more responsive, service-focused organization, building for the future. And we continued that process this quarter,” said Chip Jennings, chief executive officer of etrials.
The company has been undertaking major executive management changes as well. Jennings replaced the company founder John Cline in May, who resigned but still remains on its board of directors. Its former chief operating officer Robert Sammis was replaced with Peter Benton in July. etrials also hired a new vice president of product development, Chuck Piccirillo. The company is also building a new sales force.
Jennings spoke to a number of customers when he joined the company to ascertain what they thought needed to be changed within etrials.
“There was lots of commonality. There was not much disagreement actually. The single biggest issue from a customer perspective was service delivery issues and I don’t think it is any secret that etrials had some problems back in 2006 in regards to that,” said Jennings during the company’s recent earnings conference call.
Revenue for the quarter slipped compared with last year. The company reported net revenue of $4.1 million compared to $4.4 million during the third quarter 2006. etrials stated that its $300,000 decline in revenue was due to the timing of contracts and project initiations. etrials had a loss of $1.3 million for the quarter, which the company attributed to the addition of new personnel.
etrials’ revenue for the first nine months of 2007 were strong at $13.4 million compared with $11.3 million in the same period last year. The company said the size of projects and the timing of those contracts were reflected in the nearly 20% revenue increase. However, etrials did not see those gains on its bottom line as it reported a net loss of $3.6 million for the nine months compared with a loss of $1.7 million last year.
Two hits during 2007 were non-cash stock compensation expenses of $1.2 million and $500,000 in “CEO transition costs.” The company’s loss without those costs would have been approximately $1.9 million.
The company’s new bookings rose 19% for the first nine months of 2007, which totaled $15.5 million compared with $13 million last year during the same period. And project cancellations were down dramatically for the period at $1.1 million compared with $9.4 million in the same period last year.
“Although we are in the middle of transforming our organization, we produced strong growth in contract additions with minimal cancellations this quarter,” stated Jennings.
etrials stated it expects only modest growth in revenue during its fourth quarter and said it “expects to record a loss comparable to the current quarter before non-cash stock-based compensation” expense.
“It is important to keep in mind that we are rebuilding the sales force, so it takes time to hire and obviously you have an upfront cost because the sales people aren’t immediately productive. We’ve already seen improvements just with a smaller sales team,” said Jennings during the call.
Jennings stated etrials does not expect to realize the benefit from these investments until the second half of 2008. Its board announced it has authorized a $1 million buyback of etrials shares effective immediately.
“We are in a growing market and the rate of growth is accelerating, that’s one of the exciting things about this business. We, along with the board, are completely committed to taking a longer term view and putting right the kinds of investments we need in order to accelerate our market share over the next couple years,” said Jennings.