Second Quarter Fiscal Year 2017 Results
(compared to Second Quarter Fiscal Year 2016)
- Service revenue of $534.4 million, up
3.1%
- GAAP diluted earnings per share of
$0.41, down 43.8%; adjusted earnings per share of $0.85, down
5.6%
- Gross new business of $971 million,
cancellations of $266 million
- Backlog increased 8.4% year-over-year
to $5.94 billion
- Net book-to-bill of 1.32
PAREXEL International Corporation (NASDAQ: PRXL) today reported
financial results for the second quarter of Fiscal Year 2017, which
ended on December 31, 2016.
“We were satisfied with our adjusted EPS results in the second
quarter,” said Josef von Rickenbach, Chairman and Chief Executive
Officer of PAREXEL International. “Revenue growth in the quarter
was relatively modest mainly due to the lingering impact of
cancellations in prior periods, continuing slower backlog
conversion due to increasing clinical trial complexity, and revenue
delays from recent awards. As we expect recent strong new business
awards to contribute less near-term revenue than we had
anticipated, we are lowering our forecast for Fiscal Year 2017
revenue and diluted EPS.
“We are encouraged by the long-term revenue opportunity from our
continuing strong new business awards. Cancellations in the second
quarter returned to the normal range from the elevated levels of
the first quarter. Our strong new business performance continues to
drive solid backlog growth.
“We continue to adapt our organization to our revenue base in
order to maximize our operational efficiency,” Mr. von Rickenbach
concluded. “We announced a restructuring program in January. With
the help of this and other initiatives, we anticipate significant
improvement in adjusted operating margin in the fourth quarter of
Fiscal Year 2017 and beyond.”
Second Quarter Fiscal Year 2017
Results
For the three months ended December 31, 2016, PAREXEL’s service
revenue increased 3.1% to $534.4 million, compared with $518.5
million in the prior year period. Income from operations as
reported under Generally Accepted Accounting Principles (GAAP)
totaled $60.0 million, or 11.2% of service revenue, in the second
quarter of Fiscal Year 2017, as compared with $54.6 million, or
10.5% of service revenue, in the comparable quarter of the prior
year. GAAP net income for the quarter totaled $21.8 million, or
$0.41 per diluted share, compared with $39.4 million, or $0.73 per
diluted share, for the quarter ended December 31, 2015.
The financial results in the current and prior year period each
included items outside of the Company’s normal operations, as
detailed in the reconciliation included at the end of this press
release. PAREXEL’s service revenue of $534.4 million in the second
quarter represented growth of 3.2% on a constant currency basis.
Excluding revenue of approximately $37.2 million arising from the
acquisitions of Health Advances and ExecuPharm, revenue decreased
by 4.0% on a constant currency basis, compared to the prior year.
Adjusted operating income in the second quarter of Fiscal Year 2017
was $64.7 million, or 12.1% of service revenue. Adjusted operating
income in the second quarter of Fiscal Year 2016 was $68.4 million,
or 13.2% of service revenue. Adjusted net income was $45.0 million,
or $0.85 per diluted share, in the quarter ended December 31, 2016,
and was $48.7 million, or $0.90 per diluted share, in the quarter
ended December 31, 2015.
On a segment basis, service revenue for the second quarter of
Fiscal Year 2017 was $408.9 million in Clinical Research Services
(CRS), $54.6 million in PAREXEL Consulting (PC), and $70.9 million
in PAREXEL Informatics (PI).
Six Month Fiscal Year 2017
Results
For the six months ended December 31, 2016, service revenue was
$1,031.1 million versus $1,030.6 million in the prior year period,
essentially unchanged. GAAP operating income for the current
six-month period was $113.3 million, or 11.0% of service revenue,
compared with $90.1 million, or 8.7% of service revenue, in the
prior year period. GAAP net income for the six months ended
December 31, 2016 was $59.6 million, or $1.12 per diluted share,
compared with $64.3 million, or $1.17 per diluted share, in the
prior year period.
The financial results of the first six months in the current and
prior year period each included items outside of the Company’s
normal operations, as detailed in the reconciliation included at
the end of this press release. PAREXEL’s service revenue was
essentially unchanged on a constant currency basis at 1,031.1
million for the six months ended on December 31, 2016 compared to
the prior year period. Excluding revenue of approximately $46.2
million from the acquisitions of Health Advances and ExecuPharm,
revenue decreased by 4.5% on a constant currency basis, compared to
the prior year. Adjusted operating income was $119.0 million, or
11.5% of service revenue for the six months ended December 31,
2016, compared with $123.7 million, or 12.0% of service revenue,
for the six months ended on December 31, 2015. Adjusted net income
for the six months ended December 31, 2016 was $83.3 million, or
$1.57 per diluted share, compared with $87.7 million, or $1.60 per
diluted share, in the comparable prior-year period.
New Business and Backlog
Backlog as of December 31, 2016 was $5.94 billion, an increase
of about $462 million year over year. The reported backlog included
gross new business wins in the second quarter of $971 million,
cancellations of $266 million, and a negative impact from foreign
currency exchange of $52 million. The net book-to-bill ratio was
1.32 in the quarter.
Forward-Looking Guidance
The Company issued forward-looking guidance for the third
quarter of Fiscal Year 2017 (ending March 31, 2017) 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 acquisitions of ExecuPharm and The Medical Affairs
Company, the accelerated share repurchase program, the new
restructuring program, and the Company’s updated overall outlook.
The impact of purchase accounting related to The Medical Affairs
Company has not been included.
The Company’s guidance is:
Guidance Issued
2/1/2017
Guidance Issued
10/26/2016
Q3 FY 2017 Revenue $524 - $538 million
NA Q3 FY 2017 GAAP EPS $0.28 -
$0.42 NA Q3 FY 2017 Non-GAAP EPS*
$0.66 - $0.80 NA
FY 2017 Revenue
$2.08 - $2.12 billion
$2.15 - $2.19 billion
FY 2017 GAAP EPS
$2.30 - $2.58
$3.55 - $3.89
FY 2017 Non-GAAP EPS* $3.15 - $3.43
$3.71 - $4.05
*Adjusted numbers excludes various items, as detailed in a table
contained within this release.
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. The non-GAAP financial measures exclude the
items detailed in the reconciliation included at the end of this
press release.
A conference call to discuss PAREXEL’s second quarter Fiscal
Year 2017 earnings, business, and financial outlook will begin at
10:00 a.m. ET on Thursday, February 2, 2017 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 second quarter Fiscal Year 2017 earnings
call.
A presentation of second 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 “Q2 2017 Earnings Presentation.”
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 19,625 employees in the second
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 the
acquisition of The Medical Affairs Company, LLC, and 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 Six Months Ended (in millions, except per share
data)
December 31, 2016 December 31,
2015 December 31, 2016 December
31, 2015 Service revenue $ 534.4 $ 518.5 $ 1,031.1 $ 1,030.6
Reimbursement revenue 77.8 85.7 157.6 158.8
Total revenue 612.2 604.2 1,188.7 1,189.4 Costs and
expenses: Direct costs 350.9 332.5 678.6 675.7 Reimbursable
out-of-pocket expenses 77.8 85.7 157.6 158.8 Selling, general and
administrative 95.6 97.4 187.8 192.3 Depreciation 19.1 17.9 38.4
35.9 Amortization 7.2 5.7 12.7 11.4 Restructuring charge 1.6
10.4 0.3 25.2 Total costs and expenses 552.2
549.6 1,075.4 1,099.3 Income from operations 60.0 54.6 113.3 90.1
Other expense, net
(20.5
) (2.2 )
(23.9
) (2.0 ) Income before income taxes
39.5
52.4
89.4
88.1 Provision for income taxes 17.7 13.0 29.8 23.8 Effective tax
rate
44.8
%
24.8 %
33.3
% 27.0 % Net income $
21.8
$ 39.4 $
59.6
$ 64.3
Earnings per common
share:
Basic $
0.42
$ 0.74 $
1.14
$ 1.19 Diluted $
0.41
$ 0.73 $
1.12
$ 1.17
Shares used in
computing earnings per common share:
Basic 52.0 53.3 52.4 54.1 Diluted 52.7 54.0 53.2 54.9
Balance Sheet
Information
(Unaudited) (in millions)
December 31, 2016 December 31,
2015 June 30, 2016 Billed accounts receivable, net $
640.5 $ 488.8 $ 506.1 Unbilled accounts receivable, net 277.6 283.6
327.9 Deferred revenue (491.0 ) (436.5 ) (458.5 ) Net receivables $
427.1 $ 335.9 $ 375.5 Cash and cash
equivalents $ 252.4 $ 154.0 $ 248.6 Working capital $
472.8
$ 326.8 $ 411.8 Total assets $
2,246.4
$ 1,845.5 $ 2,036.2 Short-term borrowings $ 20.8 $ 12.8 $ 16.6
Long-term debt $ 759.9 $ 460.4 $ 487.8 Stockholders' equity $
535.1
$ 519.4 $ 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 December 31, 2016
December 31, 2015 GAAP Measure
Adjustments Non-GAAP Measure GAAP Measure
Adjustments Non-GAAP Measure
Direct costs $ 350.9 $ (2.0 ) (a) $ 348.9 $ 332.5 $ — $ 332.5 Gross
profit $ 183.5 $ 2.0 $ 185.5 $ 186.0 $ — $ 186.0 Selling, general
and administrative $ 95.6 $ (1.1 ) (b) $ 94.5 $ 97.4 $ (3.4 ) (b) $
94.0 Restructuring charge $ 1.6 $ (1.6 ) (c) $ — $ 10.4 $ (10.4 )
(c) $ — Income from operations $ 60.0 $ 4.7 $ 64.7 $ 54.6 $ 13.8 $
68.4
Other expense, net
$
(20.5
) $
20.3
(d) $ (0.2 ) $ (2.2 ) $ — $ (2.2 ) Income before income taxes $
39.5
$
25.0
$ 64.5 $ 52.4 $ 13.8 $ 66.2 Provision for income taxes $ 17.7 $ 1.8
(e) $ 19.5 $ 13.0 $ 4.5 (e) $ 17.5 Net income $
21.8
$
23.2
$ 45.0 $ 39.4 $ 9.3 $ 48.7 Diluted earnings per common share $
0.41
$
0.44
$
0.85
$ 0.73 $ 0.17 $ 0.90 Effective tax rate
44.8
% 30.2 % 24.8 % 26.4 % (a) Impact of net adjustments for
acquisition and integration related charges in our PC segment
(b) 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
(c) Severance, facility costs and changes
in estimates related to the Margin Acceleration Program
(d) Other (expense) income includes a loss
on fair value adjustment of $20.3 million in connection with
our
accelerated share repurchase program
(e) Tax effect on non-GAAP adjustments
PAREXEL
International Corporation Reconciliation of Non-GAAP
Measures Certain Line Items (Unaudited)
(in millions,
except per share data)
Six Months Ended Six Months
Ended December 31, 2016 December 31, 2015 GAAP
Measure Adjustments Non-GAAP
Measure GAAP Measure
Adjustments Non-GAAP Measure Direct costs $ 678.6 $
(4.0 ) (a) $ 674.6 $ 675.7 $ — $ 675.7 Gross profit $
352.5
$ 4.0 $
356.5
$
354.9
$ — $ 354.9 Selling, general and administrative $ 187.8 $ (1.4 )
(b) $ 186.4 $ 192.3 $ (8.4 ) (b) $ 183.9 Restructuring charge $ 0.3
$ (0.3 ) (c) $ — $ 25.2 $ (25.2 ) (c) $ — Income from operations $
113.3 $ 5.7 $ 119.0 $ 90.1 $ 33.6 $ 123.7
Other expense, net
$
(23.9
) $
20.3
(d) $ (3.6 ) $ (2.0 ) $ — $ (2.0 ) Income before income taxes $
89.4
$
26.0
$ 115.4 $ 88.1 $ 33.6 $ 121.7 Provision for income taxes $ 29.8 $
2.3 (e) $ 32.1 $ 23.8 $ 10.2 (e) $ 34.0 Net income $
59.6
$
23.7
$ 83.3 $ 64.3 $ 23.4 $ 87.7 Diluted earnings per common
share $
1.12
$
0.45
$
1.57
$ 1.17 $ 0.43 $ 1.60 Effective tax rate
33.3
% 27.8 % 27.0 % 27.9 % (a) Impact of net adjustments for
acquisition and integration related charges in our PC segment
(b) 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
(c) Severance, facility costs and changes in estimates related to
the Margin Acceleration Program
(d) Other expense includes a loss on fair
value adjustment of $20.3 million in connection with our
accelerated share repurchase program
(e) Tax effect on non-GAAP adjustments
PAREXEL
International Corporation Segment Information
(Unaudited)
Three Months Ended Three Months Ended (dollar
amounts in millions)
December 31, 2016 December 31,
2015 CRS Service revenue $ 408.9 $ 407.1 % of total
service revenue 76.5 %
78.5
% Gross profit $ 124.4 $ 132.7 Gross margin % of service revenue
30.4 % 32.6 %
PC Service revenue $ 54.6 $ 41.4 % of
total service revenue 10.2 % 8.0 % Gross profit $ 23.7 $ 20.6 Gross
margin % of service revenue 43.4 % 49.8 % Adjusted gross profit (a)
$ 25.7 $ 20.6 Adjusted gross margin % of service revenue 47.1 %
49.8 %
PI Service revenue $ 70.9 $ 70.0 % of total
service revenue 13.3 %
13.5
% Gross profit $ 35.4 $ 32.7 Gross margin % of service revenue 49.9
% 46.7 %
Total service revenue $ 534.4 $ 518.5
Total gross profit $ 183.5 $
186.0
Gross margin % of service revenue 34.3 %
35.9
%
Adjusted gross profit (a) $ 185.5 $ 186.0
Adjusted
gross margin % of service revenue 34.7 %
35.9
%
Quarterly Supplemental Financial Data
Service revenue $ 534.4 $ 518.5 Reimbursement revenue 77.8 85.7
Investigator fees 104.7 105.2 Gross revenue $ 716.9
$ 709.4 Days sales outstanding 55 44
Capital expenditures $ 14.4 $ 22.4 (a) See the direct costs
Non-GAAP reconciliation for the nature of the adjustments from
GAAP.
PAREXEL International Corporation Segment
Information (Unaudited)
Six Months Ended Six Months
Ended (dollar amounts in millions)
December 31, 2016
December 31, 2015 CRS Service revenue $ 785.2 $ 817.3
% of total service revenue 76.2 %
79.3
% Gross profit $ 238.6 $ 255.4 Gross margin % of service revenue
30.4 % 31.2 %
PC Service revenue $ 109.6 $ 80.7 % of
total service revenue 10.6 % 7.8 % Gross profit $ 48.3 $ 39.7 Gross
margin % of service revenue 44.1 % 49.2 % Adjusted gross profit (a)
$ 52.3 $ 39.7 Adjusted gross margin % of service revenue 47.7 %
49.2 %
PI Service revenue $ 136.3 $ 132.6 % of total
service revenue 13.2 %
12.9
% Gross profit $ 65.6 $ 59.8 Gross margin % of service revenue 48.1
% 45.1 %
Total service revenue $ 1,031.1 $ 1,030.6
Total gross profit $ 352.5 $ 354.9
Gross margin % of
service revenue 34.2 % 34.4 %
Adjusted gross profit (a)
$ 356.5 $ 354.9
Adjusted gross margin % of service revenue
34.6 % 34.4 % (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 February 1, 2017
Certain Line Items (Unaudited)
(in millions, except per share
data)
Guidance for the Three Months Ending Guidance for
the Twelve Months Ending March 31, 2017 June 30,
2017 GAAP Measure
Adjustments Non-GAAP Measure GAAP Measure
Adjustments Non-GAAP Measure
Direct costs $ (1.9 ) (a) $ (7.9 ) (a) Gross profit $ 1.9 $ 7.9
Selling, general and administrative $ (0.8 ) (b) $ (3.0 ) (b)
Restructuring charge $ (25.4 ) (c) $ (25.7 ) (c) Income from
operations $
28.1
$
36.6
Other expense, net
$
—
$
20.3
(d)
Income before income taxes $
28.1
$
56.9
Provision for income taxes $ 8.5
(e)
$ 12.4
(e)
Net income $ 19.6 $
44.5
Diluted earnings per common share
$
0.28 - $0.42
$0.38 $ 0.66-$0.80 $
2.30-$2.58
$0.85
$
3.15 - $3.43
(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 our new
restructuring program
(d) Adjustments of a loss on fair value in
connection with our accelerated share repurchase program
(e) Tax effect on non-GAAP adjustments
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170201006447/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
+1-781-434-8465orMedia:Cristi BarnettEmail:
Cristi.Barnett@PAREXEL.comTel.: +1 781-434-4019
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