Phase Forward Incorporated (PFWD) reported revenues of $58.8 million in the fourth quarter of 2009, up 22% from a year ago. Excluding a $597,000 purchase accounting adjustment to record deferred revenues and backlog assumed in acquisitions at fair value, revenues came in at $59.4 million.
Within total revenues, electronic data capture (EDC) license, application hosting and other related revenues were $41.6 million, up 18% from the year-ago quarter and accounting for 70% of total revenues. Gross margin came in at 57.8% in the quarter compared to 59.6% in the year-ago quarter and 57.7% in the prior quarter. The year-over-year decline in the gross margin is due to the dilutive impact of recent acquisitions.
Operating margin came in at 15%. Net income came in at $5.9 million or 13 cents per share diluted share, compared to a net income of $5.8 million or 13 cents per diluted share in the fourth quarter of 2008, easily beating the Zacks Consensus Estimate of 8 cents.
During the quarter, Phase Forward generated $15.1 million of cash from operations and used $12.9 million in capital expenditures and $14.0 million in capital expenditures. In December, the Board of Directors approved a share repurchase program of $40 million. Phase Forward exited the quarter with cash and equivalents of $135.5 million, a decrease of $11.7 million from the previous quarter.
Total deferred revenues were $98.4 million at the end of the quarter, down from $103.6 million at the end of the prior quarter but up from $88.5 million at the end of the fourth quarter of 2008.
For 2009, Phase Forward reported revenues of $213.3 million, up 25% year over year. Excluding accounting adjustments (mentioned above), revenues came in $216.3 million, up 26% year over year. Operating margin came in at 16%. Net income came in at $23.1 million or 57 cents per share in 2009 compared to a net income of $21.3 million or 48 cents per share in 2008.
Outlook
Management expects to deliver solid financial results in 2010. Revenue is expected to grow by low to mid-teens including a rapid growth in the Interactive Response Technology (IRT) market and growth in the high-single-digit to 10% range related to EDC offerings.
Revenues are projected between $56 million and $57.5 million for the first quarter of 2010. Operating income is estimated around $7.3 million and $8.1 million. EPS is forecasted around 11 cents – 12 cents. For full year 2010, Phase Forward expects revenues between $240 million and $248 million. EPS is projected between 54 cents and 60 cents.
We believe an increasing adoption of EDC will benefit Phase Forward. The company’s product range could allow it to gain market share, allowing it to grow at above-market rates, leading to positive revenues, earnings surprises and revisions.
Headquartered in Princeton, New Jersey, Phase Forward is a leading provider of data management solutions for clinical trials and drug safety.
Read the full analyst report on “PFWD”
Zacks Investment Research
