PAREXEL International Reports Fourth Quarter And Fiscal Year 2015 Results; Confirms Previous Revenue And Adjusted EPS Guidance For Fiscal Year 2016

Aug 05, 2015, 17:51 ET from PAREXEL International Corporation

BOSTON, Aug. 5, 2015 /PRNewswire/ --

Fourth Quarter Fiscal Year 2015 Results (compared to Fourth Quarter Fiscal Year 2014)

  • Adjusted earnings per share of $0.79, up 21.5%; GAAP diluted earnings per share of $0.61
  • Gross new business wins of $818 million, up 11%; net book-to-bill of 1.19; backlog at $5.3 billion
  • Service revenue of $523 million, up 2.4%; constant currency revenue growth of 5.4%
  • SG&A as a percent of service revenue decreased by 470 basis points
  • Restructuring charge of $20 million in fourth quarter 2015 related to Margin Acceleration Program
  • Adjusted operating margin of 10.8%; GAAP operating margin of 7.5%

Fiscal Year 2015 Results (compared to Fiscal Year 2014)

  • Adjusted earnings per share of $2.79, up 28.6%; GAAP diluted earnings per share of $2.65
  • Gross new business wins of $3.35 billion; net book-to-bill of 1.23; backlog up 6.5%
  • Service revenue of $2.0 billion, up 4%; constant currency revenue growth of 5.9%
  • Adjusted operating margin of 10.7%, up 40 basis points; GAAP operating margin of 9.9%

PAREXEL International Corporation (NASDAQ: PRXL) today reported financial results for the fourth quarter and Fiscal Year 2015, which ended on June 30, 2015. 

In commenting on PAREXEL's results for the quarter and Fiscal Year, Mr. Josef H. von Rickenbach, Chairman and Chief Executive Officer, stated, "PAREXEL delivered double-digit adjusted EPS growth and achieved solid new business wins in the fourth quarter. Clinical Research Services (CRS) continued to make progress in line with our expectations, and the integration of QSI, which we acquired in the quarter, is on track. On the back of solid momentum in biopharmaceutical R&D, we finished the fourth quarter with a strong backlog and business development pipeline."

Mr. von Rickenbach continued, "We are committed to building on this positive momentum in the industry in Fiscal Year 2016, and we believe we have laid the foundation for strong performance. PAREXEL has the expertise and broad range of services to address the increased complexity of drug development and client requirements. Successful implementation of our Margin Acceleration Program will enable us to execute more profitably. In addition, we expect CRS to enter a more favorable operating cycle as more projects move out of the start-up stage. We believe this paves the way for stronger backlog conversion as the Fiscal Year unfolds. Leveraging these positive dynamics, we expect to deliver accelerated profitable growth, especially in the second half of the Fiscal Year."

Fourth Quarter Fiscal Year 2015 Results For the three months ended June 30, 2015 PAREXEL's service revenue increased 2.4% to $523.0 million, compared with $510.6 million in the prior-year period. The negative impact from foreign currency exchange rate movements on revenue in the quarter was $15.2 million.  The acquisition of Quantum Solutions India (QSI), a leading provider of specialized pharmacovigilance services, closed in April 2015 and contributed $6.0 million to revenue in the fourth quarter. On a comparable basis, revenue growth was 4.2% year-over-year.  A restructuring charge of $20.0 million was recorded in the fourth quarter related to PAREXEL's ongoing Margin Acceleration Program. Operating income as reported under Generally Accepted Accounting Principles (GAAP) totaled $39.3 million, or 7.5% of service revenue, in the fourth quarter of Fiscal Year 2015, as compared with $58.8 million, or 11.5% of service revenue, in the comparable quarter of the prior year.  GAAP net income for the quarter totaled $34.2 million, or $0.61 per diluted share, compared with GAAP net income of $40.1 million, or $0.70 per diluted share, for the quarter ended June 30, 2014.  GAAP diluted earnings per share declined 12.9% year-over-year.

The financial results of the June 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.  Adjusted operating income in the fourth quarter of Fiscal Year 2015 was $56.5 million, or 10.8% of service revenue.  Adjusted operating income in the fourth quarter of Fiscal Year 2014 was $57.2 million, or 11.2% of service revenue.  Adjusted net income was $44.3 million, or $0.79 per diluted share, in the quarter ended June 30, 2015, and was $37.5 million, or $0.65 per diluted share, in the quarter ended June 30, 2014.  Adjusted earnings per share grew 21.5% year-over-year.

On a segment basis, service revenue for the fourth quarter of Fiscal Year 2015 was $403.3 million in CRS, $53.5 million in PAREXEL Consulting (PC), and $66.2 million in PAREXEL Informatics (PI).

Fiscal Year 2015 Results On a GAAP basis for the full Fiscal Year ended June 30, 2015, service revenue was $2.016 billion versus $1.939 billion in the prior year, a year-over-year increase of 4%.  Excluding the negative impact from foreign currency exchange rate movements of approximately $37.0 million in Fiscal Year 2015, and $6.0 million of revenue from the QSI acquisition, revenue growth was 5.5% year-over-year.  After recording a net restructuring charge of $19.8 million in Fiscal Year 2015, GAAP operating income was $199.9 million, or 9.9% of service revenue, compared with GAAP Fiscal Year 2014 operating income of $199.5 million, or 10.3% of service revenue. Net income on a GAAP basis for Fiscal Year 2015 was $147.8 million, or $2.65 per diluted share, compared with GAAP net income of $129.1 million, or $2.25 per diluted share, in Fiscal Year 2014.  On a GAAP basis, net income in the current year increased 14.5%, and earnings per diluted share increased 17.8% year-over-year. 

The financial results of the Fiscal Year 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.  Adjusted operating income was $216.4 million, or 10.7% of service revenue in Fiscal Year 2015, compared with adjusted operating income of $200.1 million, or 10.3% of service revenue, in Fiscal Year 2014.  On this basis, adjusted operating income in Fiscal Year 2015 increased 8.1% year-over-year.  Adjusted net income in Fiscal Year 2015 was $155.9 million, or $2.79 per diluted share, compared with adjusted net income of $124.8 million, or $2.17 per diluted share, in Fiscal Year 2014.  Adjusted net income in the current fiscal year increased 24.9% and adjusted earnings per diluted share increased 28.6% year-over-year. 

On a segment basis, service revenue for Fiscal Year 2015 was $1.535 billion in CRS, $216.0 million in PC, and $264.7 million in PI.

New Business and Backlog Backlog at the end of June 2015 was $5.3 billion, an increase of 6.5% year-over-year.  The reported backlog included gross new business wins in the fourth quarter of $817.5 million, cancellations of $193.1 million, and a positive impact from foreign currency exchange rates of $26.5 million. The net book-to-bill ratio was 1.19 in the quarter. 

Forward-looking Guidance The Company issued forward-looking guidance for the first quarter of Fiscal Year 2016 (ending September 30, 2015) and confirmed its prior revenue and EPS guidance for Fiscal Year 2016 as detailed in the chart below.  The guidance takes into account a number of factors, including recent foreign currency exchange rates, tax rates, and the Company's updated overall outlook.

The Company's guidance is:

Guidance Issued 8/05/15

Guidance Issued 6/23/15

Q1 FY 2016 Revenue

$505 - $515 million

N/A

Q1 FY 2016 GAAP EPS

Q1 FY 2016 non-GAAP EPS*

$0.40 - $0.46

$0.59 - $0.65

N/A

N/A

FY 2016 Revenue

$2.160 - $2.210 billion

$2.160 - $2.210 billion

FY 2016 GAAP EPS FY 2016 non-GAAP EPS*

$2.79 - $3.15

$3.02 - $3.38

$2.97 - $3.33

$3.02 – 3.38

 

*Adjusted diluted EPS guidance for FY 2016 excludes anticipated charges related to the Company's on-going restructuring program, known as the Margin Acceleration Program, as detailed in a table contained within this release.

Additional Information 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 or a substitute for the Company's results of operations prepared in accordance with GAAP.

A conference call to discuss PAREXEL's Fourth Quarter and Fiscal Year 2015 earnings, business, and financial outlook will begin at 10:00 a.m. ET on Thursday, August 6, 2015 and will be broadcast live over the internet via webcast.  The webcast may be accessed in the "IR Calendar" portion of the main page of the Investors section of the Company's website at www.PAREXEL.com.   Users should follow the instructions provided to assure that the necessary audio applications are downloaded and installed.  A replay of this webcast will be archived on the website approximately two hours after the call and will continue to be accessible for approximately one year following the live event.  To participate via telephone, dial +1 (408) 940-3886 and ask to join the PAREXEL International Fourth Quarter and Fiscal Year 2015 earnings conference call.

A presentation of Fourth Quarter and Fiscal Year 2015 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 "Q4 Financial Results and Trended Information".

About PAREXEL International

PAREXEL International Corporation is a leading global biopharmaceutical services organization, providing a broad range of expertise-based contract 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, medical education 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 80 locations in 51 countries around the world, and had approximately 18,660 employees in the fourth 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 expense savings from the $30$45 million restructuring charge disclosed in the press release dated June 23, 2015; 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 ClinIntel Limited and Quantum Solutions India, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on May 1, 2015, 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.

CONTACTS:   Ingo Bank, Senior Vice President and Chief Financial Officer Investor Relations: IR@PAREXEL.com or +1-781-434-4118

 

PAREXEL International Corporation

 Consolidated Condensed Statement of Operations

(Unaudited)

Three Months Ended

Twelve Months Ended

(in thousands, except per share data)

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Service revenue

$                      522,983

$                      510,595

$                   2,015,981

$                   1,939,360

Reimbursement revenue

82,142

74,529

314,293

326,982

Total revenue

605,125

585,124

2,330,274

2,266,342

Costs and expenses:

Direct costs

360,059

328,328

1,344,153

1,279,178

Reimbursable out-of-pocket expenses

82,142

74,529

314,293

326,982

Selling, general and administrative

80,892

102,758

367,192

379,800

Depreciation

17,677

17,528

69,321

66,376

Amortization

5,086

3,569

15,618

14,952

Restructuring charge (benefit)

20,010

(370)

19,845

(444)

Total costs and expenses

565,866

526,342

2,130,422

2,066,844

Income from operations

39,259

58,782

199,852

199,498

Other (expense) income, net

(1,824)

(2,601)

378

(11,637)

Income before income taxes

37,435

56,181

200,230

187,861

Provision for income taxes

3,257

16,109

52,409

58,767

Effective tax rate

8.7%

28.7%

26.2%

31.3%

Net income

$                        34,178

$                        40,072

$                      147,821

$                      129,094

Earnings per common share:

Basic

$0.62

$0.71

$2.69

$2.28

Diluted

$0.61

$0.70

$2.65

$2.25

Shares used in computing earnings per common share:

Basic

55,172

56,534

54,915

56,504

Diluted

56,046

57,450

55,838

57,477

Balance Sheet Information

Preliminary

June 30, 2015

June 30, 2014

Billed accounts receivable, net

$                      460,561

$                      497,108

Unbilled accounts receivable, net

262,200

225,514

Deferred revenue

(413,962)

(466,964)

Net receivables

$                      308,799

$                      255,658

Cash and marketable securities

$                      207,404

$                      283,812

Working capital

$                      355,696

$                      350,900

Total assets

$                   1,853,914

$                   1,834,000

Short-term borrowings

$                          8,915

$                        12,501

Long-term debt

$                      348,164

$                      337,500

Stockholders' equity

$                      667,309

$                      577,681

 

 

 

PAREXEL International Corporation

  Reconciliation of Non-GAAP Measures

Certain Line Items

(Unaudited)

Three Months Ended

Three Months Ended

(in thousands, except per share data)

June 30, 2015

June 30, 2014

GAAP Measure

Adjustments

Non-GAAP Measure

GAAP Measure

Adjustments

Non-GAAP Measure

Selling, general and administrative 

$

80,892

$

2,819

(a)

$

83,711

$

102,758

$

1,190

(a)

$

103,948

Restructuring charge (benefit)

$

20,010

$

(20,010)

(b)

$

-

$

(370)

$

370

(d)

$

-

Income from operations

$

39,259

$

17,191

$

56,450

$

58,782

$

(1,560)

$

57,222

Other expense, net

$

(1,824)

$

-

$

(1,824)

$

(2,601)

$

-

$

(2,601)

Income before income taxes

$

37,435

$

17,191

$

54,626

$

56,181

$

(1,560)

$

54,621

Provision for income taxes

$

3,257

$

7,081

(c)

$

10,338

$

16,109

$

1,022

(e)

$

17,131

Net income

$

34,178

$

10,110

$

44,288

$

40,072

$

(2,582)

$

37,490

Diluted earnings per common share

$

0.61

$

0.18

$

0.79

$

0.70

$

(0.05)

$

0.65

Effective tax rate

8.7%

18.9%

28.7%

31.4%

(a) 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

(b) Severance costs related to the Margin Acceleration Program 

(c) Tax effect on non-GAAP adjustments, and a $1.7 million adjustment due to reserve release

(d) Decrease in facility-related charges associated with restructuring plans

(e) Tax effect on non-GAAP adjustments, and a $1.3 million adjustment due to reserve release

 

PAREXEL International Corporation

  Reconciliation of Non-GAAP Measures

Certain Line Items

(Unaudited)

Twelve Months Ended

Twelve Months Ended

(in thousands, except per share data)

June 30, 2015

June 30, 2014

GAAP Measure

Adjustments

Non-GAAP Measure

GAAP Measure

Adjustments

Non-GAAP Measure

Selling, general and administrative 

$

367,192

$

3,303

(a)

$

370,495

$

379,800

$

(1,046)

(a)

$

378,754

Restructuring charge (benefit)

$

19,845

$

(19,845)

(b)

$

-

$

(444)

$

444

(e)

$

-

Income from operations

$

199,852

$

16,542

$

216,394

$

199,498

$

602

$

200,100

Other income (expense), net

$

378

$

137

(c)

$

515

$

(11,637)

$

(196)

(f)

$

(11,833)

Income before income taxes

$

200,230

$

16,679

$

216,909

$

187,861

$

406

$

188,267

Provision for income taxes

$

52,409

$

8,638

(d)

$

61,047

$

58,767

$

4,707

(g)

$

63,474

Net income

$

147,821

$

8,041

$

155,862

$

129,094

$

(4,301)

$

124,793

Diluted earnings per common share

$

2.65

$

0.14

$

2.79

$

2.25

$

(0.08)

$

2.17

Effective tax rate

26.2%

28.1%

31.3%

33.7%

(a) 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

(b) Restructuring charges include $20 million in severance costs related to the Margin Acceleration Program 

(c) Accelerated amortization of deferred financing fees related to credit facility modification

(d) Tax effect on non-GAAP adjustments, and a $1.7 million adjustment due to reserve release

(e) Decrease in facility-related charges associated with restructuring plans

(f) Recovery from bankruptcy settlement on previously impaired investment

(g) Tax effect on non-GAAP adjustments, and a $4.3 million adjustment due to reserve release

 

PAREXEL International Corporation

Segment Information

(Unaudited)

Three Months Ended

Three Months Ended

(in thousands)

June 30, 2015

June 30, 2014

Clinical Research Services (CRS)

Service revenue 

$                           403,365

$                           385,604

% of total service revenue

77.1%

75.5%

Gross profit

$                           109,037

$                           124,198

Gross margin % of service revenue

27.0%

32.2%

PAREXEL Consulting Services (PC)

Service revenue

$                             53,459

$                             58,319

(a)

% of total service revenue

10.2%

11.4%

Gross profit

$                             23,020

$                             26,160

(a)

Gross margin % of service revenue

43.1%

44.9%

PAREXEL Informatics (PI)

Service revenue

$                             66,159

$                             66,672

(a)

% of total service revenue

12.7%

13.1%

Gross profit

$                             30,867

$                             31,909

(a)

Gross margin % of service revenue

46.7%

47.9%

Total service revenue

$                           522,983

$                           510,595

Total gross profit

$                           162,924

$                           182,267

Gross margin % of service revenue

31.2%

35.7%

Quarterly Supplemental Financial Data

Service revenue

$                           522,983

$                           510,595

Reimbursement revenue

82,142

74,529

Investigator fees

111,913

133,206

Gross revenue

$                           717,038

$                           718,330

Days sales outstanding

39

32

Capital expenditures

$                             34,560

$                             22,855

(a) Effective July 1, 2014, the operating results of PAREXEL Regulatory Outsourcing Services are included in the PC segment. This service line offering was previously reported within the PI segment. For the three months ended June 30, 2015 and 2014, we disclosed the reportable segment on this basis and the prior period was retroactively restated to reflect this presentation change.

 

 

Segment Information

(Unaudited)

Twelve Months Ended

Twelve Months Ended

(in thousands)

June 30, 2015

June 30, 2014

Clinical Research Services (CRS)

Service revenue 

$                        1,535,359

$                        1,455,279

% of total service revenue

76.2%

75.0%

Gross profit

$                           449,613

$                           445,210

Gross margin % of service revenue

29.3%

30.6%

PAREXEL Consulting Services (PC)

Service revenue

$                           215,954

$                           229,842

(a)

% of total service revenue

10.7%

11.9%

Gross profit

$                             94,755

$                             96,220

(a)

Gross margin % of service revenue

43.9%

41.9%

PAREXEL Informatics (PI)

Service revenue

$                           264,668

$                           254,239

(a)

% of total service revenue

13.1%

13.1%

Gross profit

$                           127,460

$                           118,752

(a)

Gross margin % of service revenue

48.2%

46.7%

Total service revenue

$                        2,015,981

$                        1,939,360

Total gross profit

$                           671,828

$                           660,182

Gross margin % of service revenue

33.3%

34.0%

(a) Effective July 1, 2014, the operating results of PAREXEL Regulatory Outsourcing Services are included in the PC segment. This service line offering was previously reported within the PI segment. For the twelve months ended June 30, 2015 and 2014, we disclosed the reportable segment on this basis and the prior period was retroactively restated to reflect this presentation change.

 

PAREXEL International Corporation

  Reconciliation of Non-GAAP Measures

Certain Line Items

(Unaudited)

Guidance for the Three Months Ended

Guidance for the Twelve Months Ended

(in thousands, except per share data)

September 30, 2015

June 30, 2016

GAAP Measure

Adjustments

Non-GAAP Measure

GAAP Measure

Adjustments

Non-GAAP Measure

Selling, general and administrative 

$                -

$              -

(a)

Restructuring expense

$       16,000

(a)

$     20,000

(a)

Income from operations

$       16,000

$     20,000

Other income (expense), net

$                -

$              -

Income before income taxes

$       16,000

$     20,000

Provision for income taxes

$         5,440

(b)

$       6,800

(b)

Net income

$       10,560

$     13,200

Diluted earnings per common share

 $0.40 - $0.46 

$           0.19

 $0.59 - $0.65 

 $2.79 - $3.15 

$          0.23

 $3.02 - $3.38 

(a) Charges related to the Margin Acceleration Program

(b)Tax effect on non-GAAP adjustments

 

SOURCE PAREXEL International Corporation



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