- Service revenue of $529.3 million, GAAP
diluted EPS of $0.35; adjusted diluted EPS of $0.74
- Company adopts new policy for reporting
new business and backlog to align with emerging industry norm
- Net new business of $648 million, net
book-to-bill ratio of 1.22, backlog of $4.06 billion on the new
basis
- Restructuring program expanded
PAREXEL International Corporation (NASDAQ: PRXL), a leading
global biopharmaceutical services company, today reported financial
results for the third quarter of Fiscal Year 2017, which ended on
March 31, 2017.
“PAREXEL’s financial results for the third quarter of Fiscal
Year 2017 were in line with our expectations,” said Josef von
Rickenbach, Chairman and Chief Executive Officer of PAREXEL
International. “We are encouraged by our outlook for revenue and
overall operational performance in the fourth quarter.”
“We continue to be committed to margin improvement. In response
to revenue shortfalls earlier in this fiscal year, we are
right-sizing the organization. In January, we announced a
restructuring program, and we are now expanding that program. All
in, we expect total annual savings of $75-85 million from our
restructuring activities in Fiscal Year 2018. We remain committed
to our longer-term goal of 14-16% adjusted operating margin.
“The biopharmaceutical services market remains solid, and we
continue to identify good opportunities across PAREXEL’s broad
range of services," Mr. von Rickenbach concluded. "We expect that
our rising customer satisfaction positions us well to take
advantage of these opportunities and to drive improved revenue
performance in Fiscal Year 2018 and beyond.”
Beginning with the third quarter of 2017, PAREXEL is reporting
net new business and backlog based on executed contract awards, in
line with emerging practice in our industry. Like other industry
leaders, we are moving away from the former industry practice of
including pre-contract awards in net new business and backlog. Net
new business in the third quarter was $648 million and the net
book-to-bill ratio was 1.22. During the trailing twelve months, net
new business was $2.26 billion and the net book-to-bill ratio was
1.08. Backlog at the end of the third quarter was $4.06 billion.
The Company expects approximately $1.56 billion of this backlog to
convert into revenue in the next twelve months.
Third Quarter Fiscal Year 2017
Results
For the three months ended March 31, 2017, PAREXEL’s service
revenue increased 0.4% to $529.3 million, compared with $527.1
million in the prior year period. Income from operations as
reported under Generally Accepted Accounting Principles (GAAP)
totaled $29.9 million, or 5.6% of service revenue, in the third
quarter of Fiscal Year 2017, as compared with $69.7 million, or
13.2% of service revenue, in the comparable quarter of the prior
year. GAAP net income for the quarter totaled $17.8 million, or
$0.35 per diluted share, compared with $47.9 million, or $0.89 per
diluted share, for the quarter ended March 31, 2016.
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 $529.3 million in the third
quarter represented growth of 1.1% on a constant currency basis.
Foreign exchange reduced year-over-year growth in revenues in the
quarter by $3.7 million. Excluding revenue of approximately $38.7
million arising from the acquisitions of Health Advances,
ExecuPharm, and The Medical Affairs Company, revenue decreased by
5.4% on a constant currency basis, compared to the prior year.
Adjusted operating income in the third quarter of Fiscal Year 2017
was $59.4 million, or 11.2% of service revenue. Adjusted operating
income in the third quarter of Fiscal Year 2016 was $70.0 million,
or 13.3% of service revenue. Adjusted net income was $37.9 million,
or $0.74 per diluted share, in the quarter ended March 31, 2017,
and was $47.9 million, or $0.89 per diluted share, in the quarter
ended March 31, 2016.
On a segment basis, service revenue for the third quarter of
Fiscal Year 2017 was $409.1 million in Clinical Research Services
(CRS), $50.7 million in PAREXEL Consulting (PC), and $69.5 million
in PAREXEL Informatics (PI).
Nine Month Fiscal Year 2017
Results
For the nine months ended March 31, 2017, service revenue was
$1,560.4 million versus $1,557.7 million in the prior year period,
up 0.2%. GAAP operating income for the current nine-month period
was $143.2 million, or 9.2% of service revenue, compared with
$159.8 million, or 10.3% of service revenue, in the prior year
period. GAAP net income for the nine months ended March 31, 2017
was $77.4 million, or $1.47 per diluted share, compared with $112.2
million, or $2.06 per diluted share, in the prior year period.
The financial results of the first nine 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 of
$1,560.4 million in the first nine months represented growth of
0.4% on a constant currency basis. Foreign exchange reduced
year-over-year growth in revenues in the first nine months by $3.3
million. Excluding revenue of approximately $85.0 million from the
acquisitions of Health Advances, ExecuPharm, and The Medical
Affairs Company, revenue decreased by 4.8% on a constant currency
basis, compared to the prior year. Adjusted operating income was
$178.4 million, or 11.4% of service revenue for the nine months
ended March 31, 2017, compared with $193.7 million, or 12.4% of
service revenue, for the nine months ended on March 31, 2016.
Adjusted net income for the nine months ended March 31, 2017 was
$121.2 million, or $2.30 per diluted share, compared with $135.6
million, or $2.49 per diluted share, in the comparable prior-year
period.
Forward-Looking Guidance
The Company issued forward-looking guidance for the fourth
quarter of Fiscal Year 2017 (ending June 30, 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 Health Advances, ExecuPharm, and The
Medical Affairs Company, the expanded restructuring program, and
the Company’s updated overall outlook. The company does not provide
forward-looking guidance for certain financial measures on a GAAP
basis because it is unable to reasonably predict certain items
contained in the GAAP measures. Such items include, but are not
limited to, merger and transaction related expenses and other items
not reflective of the company's ongoing operations.
The Company’s guidance is:
Guidance
Issued 5/3/2017
Guidance Issued 2/1/2017 FY17-Q4 Revenue
$531 – $545 million
NA FY17-Q4 GAAP EPS
$0.57 – $0.71 NA FY17-Q4
Non-GAAP EPS* $0.87 – $1.01
NA
FY
2017 Revenue $2.09 – $2.11
billion $2.08 – $2.12 billion FY
2017 GAAP EPS $2.04 – $2.18
$2.30 – $2.58** FY 2017 Non-GAAP
EPS* $3.17 – $3.31
$3.15 – $3.43**
*Non-GAAP numbers exclude various items, as detailed in a table
contained within this release.**Reflects acquisition of The Medical
Affairs Company, excluding impacts of purchase accounting
adjustments.
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 third quarter Fiscal Year
2017 earnings, business, and financial outlook will begin at 10:00
a.m. ET on Thursday, May 4, 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 third quarter Fiscal Year 2017 earnings
call.
A presentation of third quarter Fiscal Year 2017 earnings, may
be found on the home page of the Investors section of PAREXEL.com
in a document titled “Q3 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 86 locations in 51 countries around the
world, and had approximately 19,370 employees in the third 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, including the
restructuring announced on May 3, 2017, 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, ExecuPharm,
Inc., and The Medical Affairs Company, LLC, 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 Nine Months Ended (in millions, except per share
data)
March 31, 2017 March 31,
2016 March 31, 2017 March 31,
2016 Service revenue $ 529.3 $ 527.1 $ 1,560.4 $ 1,557.7
Reimbursement revenue 75.9 84.3 233.5 243.1
Total revenue 605.2 611.4 1,793.9 1,800.8 Costs and
expenses: Direct costs 349.6 337.8 1,028.2 1,013.5 Reimbursable
out-of-pocket expenses 75.9 84.3 233.5 243.1 Selling, general and
administrative 100.8 97.1 288.6 289.4 Depreciation 20.1 18.4 58.5
54.3 Amortization 7.3 5.9 20.0 17.3 Restructuring charge (benefit)
21.6 (1.8 ) 21.9 23.4 Total costs and expenses
575.3 541.7 1,650.7 1,641.0 Income from operations 29.9 69.7 143.2
159.8 Other expense, net (5.3 ) (2.6 ) (29.2 ) (4.6 ) Income before
income taxes 24.6 67.1 114.0 155.2 Provision for income taxes 6.8
19.2 36.6 43.0 Effective tax rate 27.6 % 28.6 % 32.1 % 27.7 % Net
income $ 17.8 $ 47.9 $ 77.4 $ 112.2
Earnings per common
share:
Basic $ 0.35 $ 0.91 $ 1.49 $ 2.09 Diluted $ 0.35 $ 0.89 $ 1.47 $
2.06
Shares used in
computing earnings per common share:
Basic 50.5 52.9 51.8 53.7 Diluted 51.2 53.6 52.6 54.5
Balance Sheet
Information
(Unaudited) (in millions)
March 31, 2017 March 31,
2016 June 30, 2016 Billed accounts receivable, net $
573.1 $ 558.3 $ 506.1 Unbilled accounts receivable, net 276.6 304.7
327.9 Deferred revenue (545.0 ) (471.9 ) (458.5 ) Net receivables $
304.7 $ 391.1 $ 375.5 Cash and cash
equivalents $ 284.3 $ 209.7 $ 248.6 Working capital $ 396.7 $ 479.4
$ 411.8 Total assets $ 2,218.5 $ 2,092.6 $ 2,036.2 Short-term
borrowings $ 22.8 $ 12.8 $ 16.6 Long-term debt $ 680.0 $ 557.9 $
487.8 Stockholders' equity $ 567.7 $ 601.1 $ 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 March 31, 2017 March 31, 2016
GAAPMeasure
Adjustments
Non-GAAPMeasure
GAAPMeasure
Adjustments
Non-GAAPMeasure
Direct costs $ 349.6 $ (1.4 ) (a) $ 348.2 $ 337.8 $ (1.8 ) (a) $
336.0 Gross profit $ 179.7 $ 1.4 $ 181.1 $ 189.3 $ 1.8 $ 191.1
Selling, general and administrative $ 100.8 $ (6.5 ) (b) $ 94.3 $
97.1 $ (0.3 ) (f) $ 96.8 Restructuring charge (benefit) $ 21.6 $
(21.6 ) (c) $ — $ (1.8 ) $ 1.8 (c) $ — Income from operations $
29.9 $ 29.5 $ 59.4 $ 69.7 $ 0.3 $ 70.0 Other expense, net $ (5.3 )
$ 0.4 (d) $ (4.9 ) $ (2.6 ) $ — $ (2.6 ) Income before income taxes
$ 24.6 $ 29.9 $ 54.5 $ 67.1 $ 0.3 $ 67.4 Provision for income taxes
$ 6.8 $ 9.8 (e) $ 16.6 $ 19.2 $ 0.3 (e) $ 19.5 Net income $ 17.8 $
20.1 $ 37.9 $ 47.9 $ — $ 47.9 Diluted earnings per common share $
0.35 $ 0.39 $ 0.74 $ 0.89 $ — $ 0.89 Effective tax rate 27.6 % 30.5
% 28.6 % 28.9 %
(a) Impact of net adjustments for acquisition and integration
related charges in our PC segment(b) Impact of net adjustments for
a charge related to a fully impaired internally developed software,
and charges related to 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
restructuring programs(d) Includes a fair value adjustment loss of
$0.4 million in connection with our accelerated share repurchase
program(e) Tax effect on non-GAAP adjustments(f) Impact of net
adjustments for acquisition and integration related charges,
including the revaluation of earn-out contingent consideration
liability associated with certain acquisitions
PAREXEL International Corporation Reconciliation
of Non-GAAP Measures Certain Line Items (Unaudited)
(in
millions, except per share data)
Nine Months Ended Nine
Months Ended March 31, 2017 March 31, 2016
GAAPMeasure
Adjustments
Non-GAAPMeasure
GAAPMeasure
Adjustments
Non-GAAPMeasure
Direct costs $ 1,028.2 $ (5.4 ) (a) $ 1,022.8 $ 1,013.5 $ (1.8 )
(a) $ 1,011.7 Gross profit $ 532.2 $ 5.4 $ 537.6 $ 544.2 $ 1.8 $
546.0 Selling, general and administrative $ 288.6 $ (7.9 ) (b) $
280.7 $ 289.4 $ (8.7 ) (f) $ 280.7 Restructuring charge $ 21.9 $
(21.9 ) (c) $ — $ 23.4 $ (23.4 ) (c) $ — Income from operations $
143.2 $ 35.2 $ 178.4 $ 159.8 $ 33.9 $ 193.7 Other expense, net $
(29.2 ) $ 20.7 (d) $ (8.5 ) $ (4.6 ) $ — $ (4.6 ) Income before
income taxes $ 114.0 $ 55.9 $ 169.9 $ 155.2 $ 33.9 $ 189.1
Provision for income taxes $ 36.6 $ 12.1 (e) $ 48.7 $ 43.0 $ 10.5
(e) $ 53.5 Net income $ 77.4 $ 43.8 $ 121.2 $ 112.2 $ 23.4 $ 135.6
Diluted earnings per common share $ 1.47 $ 0.83 $ 2.30 $ 2.06 $
0.43 $ 2.49 Effective tax rate 32.1 % 28.7 % 27.7 % 28.3 %
(a) Impact of net adjustments for acquisition and integration
related charges in our PC segment(b) Impact of net adjustments for
a charge related to a fully impaired internally developed software,
and charges related to 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
restructuring programs(d) Includes a fair value adjustment loss of
$20.7 million in connection with our accelerated share repurchase
program(e) Tax effect on non-GAAP adjustments(f) Impact of net
adjustments for 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)
March 31, 2017
March 31, 2016 CRS Service revenue $ 409.1 $ 402.8 %
of total service revenue 77.3 % 76.4 % Gross profit $ 125.0 $ 131.7
Gross margin % of service revenue 30.6 % 32.7 %
PC
Service revenue $ 50.7 $ 49.9 % of total service revenue 9.6 % 9.5
% Gross profit $ 20.8 $ 21.7 Gross margin % of service revenue 41.0
% 43.5 % Adjusted gross profit (a) $ 22.2 $ 23.5 Adjusted gross
margin % of service revenue 43.8 % 47.1 %
PI Service
revenue $ 69.5 $ 74.4 % of total service revenue 13.1 % 14.1 %
Gross profit $ 33.9 $ 35.9 Gross margin % of service revenue 48.8 %
48.3 %
Total service revenue $ 529.3 $ 527.1
Total
gross profit $ 179.7 $ 189.3
Gross margin % of service
revenue 34.0 % 35.9 %
Adjusted gross profit (a) $ 181.1
$ 191.1
Adjusted gross margin % of service revenue 34.2 %
36.3 %
Quarterly
Supplemental Financial Data
Service revenue $ 529.3 $ 527.1 Reimbursement revenue 75.9 84.3
Investigator fees 98.4 89.1 Gross revenue $ 703.6
$ 700.5 Days sales outstanding 39 51
Capital expenditures $ 23.5 $ 23.5
(a) See the direct costs Non-GAAP reconciliation for the nature
of the adjustments from GAAP.
PAREXEL International Corporation Segment
Information (Unaudited)
Nine Months Ended Nine Months
Ended (dollar amounts in millions)
March 31, 2017
March 31, 2016 CRS Service revenue $ 1,194.3 $
1,220.1 % of total service revenue 76.5 % 78.3 % Gross profit $
363.6 $ 387.1 Gross margin % of service revenue 30.4 % 31.7 %
PC Service revenue $ 160.3 $ 130.6 % of total service
revenue 10.3 % 8.4 % Gross profit $ 69.1 $ 61.4 Gross margin % of
service revenue 43.1 % 47.0 % Adjusted gross profit (a) $ 74.5 $
63.2 Adjusted gross margin % of service revenue 46.5 % 48.4 %
PI Service revenue $ 205.8 $ 207.0 % of total service
revenue 13.2 % 13.3 % Gross profit $ 99.5 $ 95.7 Gross margin % of
service revenue 48.3 % 46.2 %
Total service revenue $
1,560.4 $ 1,557.7
Total gross profit $ 532.2 $ 544.2
Gross margin % of service revenue 34.1 % 34.9 %
Adjusted
gross profit (a) $ 537.6 $ 546.0
Adjusted gross margin % of
service revenue 34.5 % 35.1 %
(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 May 3, 2017
Certain Line Items (Unaudited)
(in millions, except per share data)
Guidance for the Three Months Ending Guidance for the
Twelve Months Ending June 30, 2017 June 30, 2017
GAAPMeasure
Adjustments
Non-GAAPMeasure
GAAP Measure Adjustments
Non-GAAPMeasure
Direct costs $ (1.7 ) (a) $ (7.1 ) (a) Gross profit $ 1.7 $ 7.1
Selling, general and administrative $ (1.0 ) (b) $ (8.9 ) (c)
Restructuring charge $ (20.0 ) (d) $ (41.9 ) (d) Income from
operations $ 22.7 $ 57.9 Other expense, net $ — $ 20.7 (d) Income
before income taxes $ 22.7 $ 78.6 Provision for income taxes $ 7.4
(f) $ 19.5 (f) Net income $ 15.3 $ 59.1 Diluted earnings per common
share $ 0.57-$0.71 $0.30 $ 0.87-$1.01
$
2.04-$2.18
$1.13 $ 3.17-$3.31
(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) Impact of net adjustments related to a fully
impaired internally developed software and acquisition and
integration related charges associated with certain
acquisitions.(d) Severance and facility costs and changes in
estimates related to our restructuring programs.(e) Adjustment of a
loss on fair value in connection with our accelerated share
repurchase program.(f) Tax effect on non-GAAP adjustments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170503006693/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:Erik KoppPAREXEL InternationalEmail:
Erik.Kopp@PAREXEL.comTel.: + 1-781-434-5304
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