First Quarter Fiscal Year 2017 Results
(compared to First Quarter Fiscal Year 2016)
- GAAP diluted earnings per share of
$0.75, up 66.7%; adjusted earnings per share of $0.76, up 8.6%
- Service revenue of $500.9 million, down
2.2%; constant currency revenue decline of 2.4%
- Gross new business of $930 million
- Company guides to GAAP EPS of
$3.55-$3.89 and adjusted EPS of $3.71-$4.05 for Fiscal Year
2017
- Board approved new $200 million share
repurchase program
PAREXEL International Corporation (NASDAQ: PRXL) today reported
financial results for the first quarter of Fiscal Year 2017, which
ended on September 30, 2016.
“PAREXEL’s performance in the first quarter fell short of our
expectations,” said Josef H. von Rickenbach, Chairman and Chief
Executive Officer. “Revenue in the quarter was impacted by higher
than expected cancellations, project delays, and continued slow
backlog conversion. High cancellations in the first quarter are
expected to impact revenue performance for the balance of Fiscal
Year 2017.
“At the same time, we are encouraged by our continued strong
gross new business awards in the quarter, which we believe speak to
the strength of our competitive offering,” Mr. von Rickenbach
continued. “Ongoing corporate development activities, such as the
recent acquisition of ExecuPharm, are expected to contribute to
revenue growth. PAREXEL is also committed to maximizing shareholder
value through sustained margin improvement and effective capital
deployment, including a new $200 million share repurchase program.
As a result of these actions, we expect to deliver double-digit
adjusted diluted EPS growth for the Fiscal Year at the midpoint of
our guidance range."
PAREXEL announced that its Board of Directors has approved a
program authorizing the repurchase of up to $200 million of the
Company's common stock. There is no set expiration date for the
program. The Company intends to use cash on hand, cash generated
from operations, existing credit facilities or other financing to
fund the share repurchase program.
First Quarter Fiscal Year 2017
Results
For the three months ended September 30, 2016, PAREXEL’s service
revenue decreased 2.2% to $500.9 million, compared with $512.1
million in the prior year period. Income from operations as
reported under Generally Accepted Accounting Principles (GAAP)
totaled $56.6 million, or 11.3% of service revenue, in the first
quarter of Fiscal Year 2017, as compared with $35.5 million, or
6.9% of service revenue, in the comparable quarter of the prior
year. GAAP net income for the quarter totaled $40.2 million, or
$0.75 per diluted share, compared with $24.9 million, or $0.45 per
diluted share, for the quarter ended September 30, 2015. GAAP
diluted earnings per share in the quarter increased 66.7% year over
year.
The financial results of the September quarter in the current
and prior year period each included items outside of the Company’s
normal operations, as detailed in the financial tables within this
press release. PAREXEL’s service revenue decreased by 2.4% on a
constant currency basis to $500.9 million, compared with the prior
year period. Excluding revenue of $9.1 million arising from the
acquisition of Health Advances, revenue decreased by 4.2% on a
constant currency basis, compared to the prior year. Adjusted
operating income in the first quarter of Fiscal Year 2017 was $57.6
million, or 11.5% of service revenue. Adjusted operating income in
the first quarter of Fiscal Year 2016 was $55.3 million, or 10.8%
of service revenue. Adjusted net income was $40.7 million, or $0.76
per diluted share, in the quarter ended September 30, 2016, and was
$39.0 million, or $0.70 per diluted share, in the quarter ended
September 30, 2015. Adjusted diluted earnings per share in the
quarter grew 8.6% year over year.
On a segment basis, service revenue for the first quarter of
Fiscal Year 2017 was $381.6 million in Clinical Research Services
(CRS), $54.2 million in PAREXEL Consulting (PC), and $65.1 million
in PAREXEL Informatics (PI).
New Business and Backlog
Backlog as of September 30, 2016 was $5.8 billion, an increase
of approximately $365 million year over year. The reported backlog
included gross new business wins in the first quarter of $930
million, cancellations of $364 million, and a negative impact from
foreign currency exchange rates of $2.6 million. The net
book-to-bill ratio was 1.13 in the quarter.
Forward-Looking Guidance
The Company issued forward-looking guidance for the second
quarter of Fiscal Year 2017 (ending December 31, 2016) and updated
its guidance for revenue and EPS for Fiscal Year 2017, as detailed
in the chart below. The guidance takes into account a number of
factors, including recent foreign currency exchange rates, tax
rates, the ExecuPharm acquisition (excluding the impact of purchase
accounting), the share repurchase program, and the Company’s
updated overall outlook.
The Company’s guidance is:
Guidance Issued 10/26/16
Guidance Issued 8/3/16 Q2 FY 2017 Revenue
$535-$550 million NA Q2 FY 2017 GAAP EPS
$0.68-$0.82 NA Q2 FY 2017 Non-GAAP EPS*
$0.76-$0.90 NA
FY 2017 Revenue
$2.150-$2.190 billion $2.175-$2.205 billion FY 2017
GAAP EPS $3.55-$3.89 $3.72-$3.98 FY
2017 Non-GAAP EPS* $3.71-$4.05
$3.79-$4.05
*Adjusted numbers excludes various items, as detailed in a table
contained within this release.
The share repurchase program does not obligate the Company to
acquire any particular amount of common stock, and it could be
modified, extended, suspended or discontinued at any time.
The timing and amount of repurchases will be determined by
PAREXEL's management based on a variety of factors such as trading
price, corporate requirements, and overall market conditions, and
will be subject to applicable legal requirements including federal
and state securities laws. Purchases will be made in open market
transactions effected through a broker-dealer at prevailing market
prices, in block trades, or in privately negotiated transactions.
Shares may also be purchased pursuant to a trading plan meeting the
requirements of Rule 10b5-1 under the Securities Exchange Act of
1934, as amended, which would permit shares to be repurchased when
the Company might otherwise be precluded from doing so under
insider trading laws.
Additional Information
The financial results in this release are preliminary and
unaudited.
In addition to the financial measures prepared in accordance
with GAAP, the Company uses certain non-GAAP financial measures.
The Company believes that presenting the non-GAAP financial
measures contained in this press release assists investors and
others in gaining a better understanding of its core operating
results and future prospects, especially when comparing such
results to previous periods or forecasted guidance, because such
measures exclude items that are outside of the Company’s normal
operations and/or, in certain cases, are difficult to forecast
accurately for future periods. Management uses non-GAAP financial
measures, in addition to the measures prepared in accordance with
GAAP, as the basis for measuring the Company’s core operating
performance and comparing such performance to that of prior periods
and to the performance of its competitors for the same reasons
stated above. Such measures are also used by management in its
financial and operating decision-making. Non-GAAP financial
measures are not meant to be considered superior to, nor a
substitute for, the Company’s results of operations prepared in
accordance with GAAP.
A conference call to discuss PAREXEL’s first quarter Fiscal Year
2017 earnings, business, and financial outlook will begin at 10:00
a.m. ET on Thursday, October 27, 2016 and will be broadcast live
over the internet via webcast. To access the webcast, visit the
Investor Section of PAREXEL’s website at www.investor.parexel.com. This webcast will
continue to be accessible for one year following the live
broadcast. To participate via telephone, dial +1-408-940-3886 and
ask to join PAREXEL’s first quarter Fiscal Year 2017 earnings
call.
A presentation of first quarter Fiscal Year 2017 results, as
well as certain trended financial information, may be found on the
home page of the Investors portion of the Company’s website in a
document titled “Q1 Financial Results and Trended Information.”
About PAREXEL International
PAREXEL International Corporation is a leading global
biopharmaceutical services company, providing a broad range of
expertise-based clinical research, consulting, medical
communications, and technology solutions and services to the
worldwide pharmaceutical, biotechnology and medical device
industries. Committed to providing solutions that expedite
time-to-market and peak-market penetration, PAREXEL has developed
significant expertise across the development and commercialization
continuum, from drug development and regulatory consulting to
clinical pharmacology, clinical trials management, and
reimbursement. PAREXEL Informatics provides advanced technology
solutions, including medical imaging, to facilitate the clinical
development process. Headquartered near Boston, Massachusetts,
PAREXEL has offices in 85 locations in 51 countries around the
world, and had approximately 18,750 employees in the first quarter.
For more information about PAREXEL International visit www.PAREXEL.com.
PAREXEL and PAREXEL Informatics are trademarks or registered
trademarks of PAREXEL International Corporation or its
affiliates.
This release contains “forward-looking” statements regarding
future results and events, including, without limitation,
statements regarding expected financial results, future growth and
customer demand. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed
forward-looking statements. Without limiting the foregoing, the
words “believes,” “anticipates,” “plans,” “expects,” “intends,”
“appears,” “estimates,” “projects,” “will,” “would,” “could,”
“should,” “targets,” and similar expressions are also intended to
identify forward-looking statements. The forward-looking statements
in this release involve a number of risks and uncertainties. The
Company’s actual future results may differ materially from the
results discussed in the forward-looking statements contained in
this release. Important factors that might cause such a difference
include, but are not limited to, risks associated with: actual
operating performance; actual expense savings and other operating
improvements resulting from restructurings, the loss, modification,
or delay of contracts which would, among other things, adversely
impact the Company’s recognition of revenue included in backlog;
the Company’s dependence on certain industries and clients; the
Company’s ability to win new business, manage growth and costs, and
attract and retain employees; the Company’s ability to complete
additional acquisitions, and to integrate newly acquired businesses
including the acquisitions of Health Advances, LLC and ExecuPharm,
Inc., or enter into new lines of business; the impact on the
Company’s business of government regulation of the drug, medical
device and biotechnology industry; consolidation within the
pharmaceutical industry and competition within the
biopharmaceutical services industry; the potential for significant
liability to clients and third parties; the potential adverse
impact of health care reform; and the effects of foreign currency
exchange rate fluctuations and other international economic,
political, and other risks. Such factors and others are discussed
more fully in the section entitled “Risk Factors” of the Company’s
Annual Report on Form 10-K and subsequent quarterly reports on Form
10-Q, as filed with the Securities and Exchange Commission, which
“Risk Factors” discussion is incorporated by reference in this
press release. The Company specifically disclaims any obligation to
update these forward-looking statements in the future. These
forward-looking statements should not be relied upon as
representing the Company’s estimates or views as of any date
subsequent to the date of this press release.
PAREXEL International Corporation Consolidated
Condensed Statement of Operations (Unaudited)
Three Months Ended (in millions,
except per share data)
September 30, 2016
September 30, 2015 Service revenue $ 500.9 $ 512.1
Reimbursement revenue 79.8 73.1 Total revenue 580.7
585.2 Costs and expenses: Direct costs 328.6 343.2 Reimbursable
out-of-pocket expenses 79.8 73.1 Selling, general and
administrative 92.2 94.9 Depreciation 19.3 18.0 Amortization 5.5
5.7 Restructuring (benefit) charge (1.3 ) 14.8 Total costs
and expenses 524.1 549.7 Income from operations 56.6 35.5 Other
(expense) income, net (3.4 ) 0.2 Income before income taxes
53.2 35.7 Provision for income taxes 13.0 10.8 Effective tax rate
24.4 % 30.3 % Net income $ 40.2 $ 24.9
Earnings per common
share:
Basic $ 0.76 $ 0.45 Diluted $ 0.75 $ 0.45
Shares used in
computing earnings per common share:
Basic 52.9 55.0 Diluted 53.7 55.9
Balance Sheet
Information
(Unaudited) (in millions)
September 30, 2016 September
30, 2015 June 30, 2016 Billed accounts receivable, net $
518.0 $ 428.1 $ 506.1 Unbilled accounts receivable, net 297.4 284.0
327.9 Deferred revenue (449.2 ) (411.5 ) (458.5 ) Net receivables $
366.2 $ 300.6 $ 375.5 Cash and cash
equivalents $ 325.8 $ 157.9 $ 248.6 Working capital $ 485.5 $ 301.7
$ 411.8 Total assets $ 2,084.4 $ 1,800.1 $ 2,036.2 Short-term
borrowings $ 18.3 $ 12.8 $ 16.6 Long-term debt $ 505.0 $ 472.8 $
487.8 Stockholders' equity $ 691.8 $ 479.6 $ 633.4
PAREXEL International Corporation Reconciliation of
Non-GAAP Measures Certain Line Items (Unaudited)
(in millions, except per share
data)
Three Months Ended Three Months Ended
September 30, 2016 September 30, 2015
GAAPMeasure
Adjustments
Non-GAAPMeasure
GAAPMeasure
Adjustments
Non-GAAPMeasure
Direct costs $ 328.6 $ (2.0 ) (a) $ 326.6 $
343.2 $ — $ 343.2 Gross profit $ 172.3 $ 2.0 $
174.3 $ 168.9 $ — $ 168.9 Selling, general and administrative $
92.2 $ (0.3 ) (b) $ 91.9 $ 94.9 $ (5.0 ) (e) $ 89.9 Restructuring
(benefit) charge $ (1.3 ) $ 1.3 (c) $ — $ 14.8 $ (14.8 ) (c) $ —
Income from operations $ 56.6 $ 1.0 $ 57.6 $ 35.5 $ 19.8 $ 55.3
Other (expense) income, net $ (3.4 ) $ — $ (3.4 ) $ 0.2 $ — $ 0.2
Income before income taxes $ 53.2 $ 1.0 $ 54.2 $ 35.7 $ 19.8 $ 55.5
Provision for income taxes $ 13.0 $ 0.5 (d) $ 13.5 $ 10.8 $ 5.7 (d)
$ 16.5 Net income $ 40.2 $ 0.5 $ 40.7 $ 24.9 $ 14.1 $ 39.0 Diluted
earnings per common share $ 0.75 $ 0.01 $ 0.76 $ 0.45 $ 0.25 $ 0.70
Effective tax rate 24.4 % 24.9 % 30.3 % 29.7 %
(a) Impact of net adjustments for acquisition and integration
related charges in our PC segment(b) Impact of net adjustments for
acquisition and integration related charges associated with certain
acquisitions(c) Severance and facility costs and changes in
estimates related to the Margin Acceleration Program(d) Tax effect
on non-GAAP adjustments(e) Impact of net adjustments for legal
settlements and acquisition and integration related charges,
including the revaluation of earn-out contingent consideration
liability associated with certain acquisitions
PAREXEL International Corporation Segment
Information (Unaudited)
Three Months Ended Three Months Ended
(dollar amounts in millions)
September 30, 2016 September
30, 2015 CRS Service revenue $ 381.6 $ 410.2 % of total
service revenue 76.2 % 80.1 % Gross profit $ 118.6 $ 122.7 Gross
margin % of service revenue 31.1 % 29.9 %
PC Service
revenue $ 54.2 $ 39.3 % of total service revenue 10.8 % 7.7 % Gross
profit $ 23.8 $ 19.1 Gross margin % of service revenue 43.9 % 48.6
% Adjusted gross profit (a) $ 25.8 $ 19.1 Adjusted gross margin %
of service revenue 47.6 % 48.6 %
PI Service revenue $
65.1 $ 62.6 % of total service revenue 13.0 % 12.2 % Gross profit $
29.9 $ 27.1 Gross margin % of service revenue 45.9 % 43.3 %
Total service revenue $ 500.9 $ 512.1
Total gross
profit $ 172.3 $ 168.9
Gross margin % of service revenue
34.4 % 33.0 %
Adjusted gross profit (a) $ 174.3 $ 168.9
Adjusted gross margin % of service revenue 34.8 % 33.0 %
Quarterly
Supplemental Financial Data
Service revenue $ 500.9 $ 512.1 Reimbursement revenue 79.8 73.1
Investigator fees 105.7 110.5 Gross revenue $ 686.4
$ 695.7 Days sales outstanding 49 40
Capital expenditures $ 18.8 $ 30.9
(a) See the direct costs Non-GAAP reconciliation for the nature
of the adjustments from GAAP.
PAREXEL International Corporation Reconciliation of
Non-GAAP Measures for Guidance Issued on October 26, 2016
Certain Line Items (Unaudited)
(in
millions, except per share data)
Guidance for the Three Months
Ending Guidance for the Twelve Months Ending December
31, 2016 June 30, 2017
GAAPMeasure
Adjustments
Non-GAAPMeasure
GAAPMeasure
Adjustments
Non-GAAPMeasure
Direct costs $ (2.8 ) (a) $ (10.3 ) (a) Gross profit $ 2.8 $ 10.3
Selling, general and administrative $ — $ (0.3 ) (b) Restructuring
charge $ (3.0 ) (c) $ (1.7 ) (c) Income from operations $ 5.8 $
12.3 Income before income taxes $ 5.8 $ 12.3 Provision for income
taxes $ 1.8 (d) $ 4.1 (d) Net income $ 4.0 $ 8.2 Diluted earnings
per common share $0.68-$0.82 $0.08 $0.76-$0.90 $3.55-$3.89 $0.16
$3.71-$4.05
(a) Impact of net adjustments for acquisition and integration
related charges in our PC segment and CRS segment(b) Impact of net
adjustments for acquisition and integration related charges
associated with certain acquisitions(c) Severance and facility
costs and changes in estimates related to the Margin Acceleration
Program(d) Tax effect on non-GAAP adjustments
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161026006761/en/
Emma ReeveCorporate Vice President and Interim Chief Financial
OfficerPAREXEL InternationalIR@PAREXEL.com+ 1-781-434-4118orRonald
AldridgeSenior Director of Investor RelationsPAREXEL
InternationalRon.Aldridge@PAREXEL.com+ 1-781-434-4753 or
+1-781-434-8465
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