DATATRAK International, Inc. Reports Second Quarter Results of 2015

CLEVELAND, Aug. 12, 2015 /PRNewswire/ -- DATATRAK International, Inc. (OTCQX: DTRK), a leader in cloud-based, unified dClinical^® technologies and related services for the clinical trials industry, today announced its operating results for the second quarter 2015.

Second Quarter Highlights:

• Fifth consecutive quarter of record backlog, ending the second quarter of 2015 at $28.1 million, a 27% increase year over year
• Book-to-bill ratio of 2.7 at June 30, 2015, up from 2.0 at June 30, 2014, reflecting a continuing transition to a longer, more stable revenue stream with more Enterprise Agreements and large platform wins
• 18% growth in average contract value in the first half of 2015 versus the same period in 2014
• Market-leading 100% of new contract clients committed to multiple products with 71% committed to 3 or more products
• Strong new client acquisition in first half of 2015, including a new APAC partner and several innovative biotechs
• Extended brand awareness with record setting 127% increase in number of software demonstrations and 18% increase in booth traffic at DIA US 2015
• Introduction of UX CTMS 360™ at DIA US 2015 – a revolutionary next generation clinical trial management system
• Clients in the first half of 2015 include 10 of Top 15 Pharmaceutical companies as well as leading Global CROs and Device organizations
• New executive leadership in both Marketing and Sales supporting strategic direction in 2015
• The explosion of digital data is transforming clinical research. From wearable devices to EHR and images, health data is being tracked across a growing list of outlets. Our platform uniquely maximizes the potential efficiency of these data sources with our digital clinical platform, or dClinical

Laurence P. Birch, DATATRAK's Chairman and CEO, commented, "We are committed to the long-term vision and health of our company. Without the shackles of debt or reliance on capital infusions, we are positioned for optimal future growth opportunities for our company, all while avoiding the short-term focus that can often jeopardize a company's ability to generate and sustain long term returns. To that end, we have been and will continue to be focused on creating a more balanced revenue stream to generate real long-term value for our company and our investors."

"We've faithfully executed against our strategic plan for the last several years and are beginning to see the results of the paradigm shift we expected. Our revenue mix has evolved as we are seeing growth in long-term enterprise subscription bookings, which has had a corresponding and anticipated negative short-term effect on revenue. A great example of the success we are seeing is our recent announcement of a Top 10 medical device company selecting DATATRAK for a five-year global contract. This is the largest agreement in our company's history. We believe we have a robust pipeline of opportunities that will allow us to continue this momentum in the coming quarters."

"Existing clients are deepening the adoption of the platform. All, 100%, of our second quarter contracts call for two or more solutions, with 71% for three or more solutions. This depth of application use is unmatched by anyone in the industry. DATATRAK is taking both mindshare and market share," continued Birch. 

"The results this quarter reflect a myriad of intersecting elements," stated Jennifer W. Mabe, DATATRAK's Chief Financial Officer. "Our investments into long-term growth continue to produce results as evidenced by our growing backlog. We have also had strong new client acquisition in the first half of the year.  These positive aspects were offset by the impact of significant sponsor drug program delays on the top line as well as increased legal spend in SG&A to protect our intellectual property. In addition, as seen across the industry, we are affected by longer sales cycles as we transition our business to longer-term Enterprise Agreements.  The complex enterprise sale has evolved into a discussion with multiple stakeholders involved across the client organization, resulting in a longer closing timeline."

"All of that said, we believe the payoff will be substantial and will validate our strategy. We are seeing a competitive displacement from multi-year sales efforts setting the stage for nice ROI from these strategic customers," concluded Mabe.

"We believe that our long-standing call to reconsider the clinical trial software choice is being validated by market reaction to our products. Leading sales indicators show a surge in interest in our solutions and services with an increase in large RFP inclusions for Top 20 pharma and medical device companies, growth in average deal value and continued deepening of platform adoption. We will continue to challenge clinical research professionals to reconsider their options and realize there is a better choice; one that simplifies their research and reduces complexities.  And that's DATATRAK," concluded Birch.

The Company continues to defend and assert its intellectual property assets in litigation with Medidata Solutions.  This quarter saw increased activity, particularly with respect to discovery associated with the Company's continued efforts to bolster its infringement position against Medidata in the Ohio case, as well as successfully rebuffing Medidata's attempt to strike the Company's infringement contentions against Medidata Rave.  In the separate New Jersey case filed by Medidata, the Company filed a yet-to-be decided motion to dismiss Medidata's complaint and invalidate its patents under the Alice doctrine promulgated by the U.S. Supreme Court.

Financial Highlights:

The Company's revenue decreased 17% for the three months ended June 30, 2015 compared to the three months ended June 30, 2014.  The decrease in revenue is due to a variety of factors, including a lengthening sales cycle, drug program sponsor delays, the extension of an enterprise license agreement, which required DATATRAK to recognize the new contract revenue over a longer period of time, affecting short-term revenue, and the tapering off of a significant long-term contract that is nearing completion.  DATATRAK is evolving the focus of its sales model to enhance long-term stability through enterprise license agreements.  The change in focus affects revenue growth in the short-term as evidenced by the decrease for the second quarter of 2015; however, it is establishing long-term stability as evidenced by the increase in backlog.  Furthermore, the recently announced 5-year agreement with a global device manufacturer along with other new contracts should provide a significant and stable influx of cash to continue to fund growth initiatives.  Direct costs decreased by 5% during this same time period due to lower ISP costs and the outsourcing of some clinical data management work as we strategically phase out services that do not support our ongoing business model. The Company's gross margin decreased to 77% for the second quarter of 2015 compared to 80% for the second quarter of 2014 due to lower revenue, as mentioned above. SG&A expenses increased by $538,000, or 21%, to $3,152,000 from $2,614,000 for the three months ended June 30, 2015 and 2014, respectively. The increase was primarily due to higher legal costs, a substantial portion related to patent defense, and increased rent expense due to the opening of the Chicago office, which will be partially offset in future quarters by consolidations in other offices.  We saw reduced expenses this quarter in recruitment costs due to several placements that took place in 2014 to support sales, technical services and human resources.  As a result, DATATRAK's loss from operations for three months ended June 30, 2015 was $(1,391,000) compared to a loss from operations of $(375,000) for the corresponding period in 2014.

DATATRAK's backlog at June 30, 2015 was $28.1 million compared to a backlog of $26.0 million at December 31, 2014. 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.

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.

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About DATATRAK International, Inc.
DATATRAK International is a worldwide technology and services company delivering unified dClinical^® solutions and related services for the clinical trials industry. DATATRAK built its multi-component, comprehensive solution on a single, unified platform and expanded this concept to include services delivery via DATATRAK's Clinical and Consulting Services group. The Company delivers a complete portfolio of software products designed to accelerate the reporting of clinical research data from sites to sponsors and ultimately regulatory authorities, faster and more efficiently than loosely integrated technologies. The DATATRAK ONE^® software solution, deployed worldwide through an ASP or Enterprise Transfer offering, supports Preclinical and Phase I - Phase IV drug and device studies in multiple languages throughout the world. DATATRAK is located in Chicago, Illinois; Cleveland, Ohio; Bryan, Texas; Cary (RTP), North Carolina; and Plymouth, Minnesota.  For more information, visit http://www.datatrak.com.

Except for the historical information contained in this press release, the statements made in this release are forward-looking statements. These forward-looking statements are made based on management's expectations, assumptions, estimates and current beliefs concerning the operations, future results and prospects of the Company and are subject to uncertainties and factors which are difficult to predict and, in many instances, are beyond the control of the Company, and which could cause actual results to differ materially from those contemplated in these forward-looking statements. For a list of certain factors that may cause actual results to differ materially from those contemplated in these forward looking statements, please see the Company's report filed with the OTCQX Market on March 13, 2015 announcing its results for the full-year period ended December 31, 2014. The Company undertakes no obligation to update publicly or revise any forward-looking statement whether as a result of new information, future events or otherwise.

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SOURCE DATATRAK International, Inc.

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