- Published: 31 January 2012
- Written by Editor
PAREXEL Reports Second Quarter Fiscal Year 2012 Financial Results
- Consolidated service revenue of $333.2 million grew 9.5% year-over-year
- GAAP operating margin of 6.8%; adjusted operating margin of 7.1% excluding net restructuring charges of $1.2 million
- GAAP diluted earnings per share of $0.21; adjusted earnings per share of $0.23 excluding restructuring and related charges
- Backlog at approximately $3.74 billion, up 23.8% from the December quarter one year ago, with a net book-to-bill ratio of 1.50
PAREXEL International Corporation (NASDAQ: PRXL - News) today announced its financial results for the second quarter ended December 31, 2011.
For the three months ended December 31, 2011, PAREXEL's consolidated service revenue increased by 9.5% to $333.2 million compared with $304.4 million in the prior year period. On a same store basis, excluding $1.4 million of service revenue in the prior year quarter related to subsequently divested Early Phase units, revenue increased 10.0%. On a year-over-year basis, foreign exchange had a de minimus impact on service revenue in the current quarter. The Company reported operating income under Generally Accepted Accounting Principles (GAAP) of $22.6 million, or 6.8% of consolidated service revenue, in the second quarter of Fiscal Year 2012, versus GAAP operating income of $28.2 million, or 9.3% of consolidated service revenue, in the same quarter of the prior fiscal year. GAAP net income for the quarter ended December 31, 2011 totaled $12.9 million, or $0.21 per diluted share, compared with GAAP net income of $16.8 million, or $0.28 per diluted share, for the quarter ended December 31, 2010. GAAP net income in the quarter decreased by 23.1% year-over-year, and earnings per diluted share decreased by 25.0%.
In Fiscal Years 2012 and 2011, the financial results for the respective December quarters each included special items, as detailed in the financial charts within this press release. Excluding the impact of these special items, adjusted operating income in the second quarter of Fiscal Year 2012 was $23.8 million, or 7.1% of consolidated service revenue. Excluding these special items in the prior year period, adjusted operating income was $27.6 million, or 9.1% of consolidated service revenue. On this adjusted basis, operating income in the quarter ended December 31, 2011 declined 14.0% year-over-year. Adjusted net income in the current and prior periods (which excludes the special items referenced above) was $13.9 million, or $0.23 per diluted share in the quarter ended December 31, 2011, and was $17.2 million, or $0.29 per diluted share in the quarter ended December 31, 2010. Using adjusted numbers in both periods, net income in the current quarter declined by 19.5% year-over-year, and adjusted earnings per diluted share declined by 20.7%.
The Company reported significant progress with regard to its initiative to reduce Days Sales Outstanding (DSO), which declined 10 days on a sequential basis to 57 days.
On a segment basis, consolidated service revenue for the second quarter of Fiscal Year 2012 was $247.9 million in Clinical Research Services (CRS), $38.5 million in PAREXEL Consulting and Medical Communications Services (PCMS), and $46.8 million in Perceptive Informatics.
For the six months ended December 31, 2011, consolidated service revenue was $647.9 million versus $600.2 million in the prior year period, an increase of 8.0%. GAAP operating income for the current six-month period was $35.0 million, or 5.4% of service revenue, compared with GAAP operating income of $58.2 million, or 9.7% of service revenue in the prior year period. GAAP net income for the six months ended December 31, 2011 was $22.5 million, or $0.37 per diluted share, compared with GAAP net income of $34.6 million, or $0.58 per diluted share, in the prior year period. Excluding the impact of special items as detailed in the attached financial charts in both six month periods, operating income was $38.9 million or 6.0% of consolidated service revenue for the six months ended on December 31, 2011, compared with $57.2 million or 9.5% of consolidated service revenue for the six months ended on December 31, 2010. On an adjusted basis, net income for the six months ended December 31, 2011 was $25.6 million, or $0.43 per diluted share, compared with $34.7 million or $0.58 per diluted share in the comparable prior year six month period.
Backlog at the end of December was approximately $3.74 billion, an increase of 23.8% year-over-year. The reported backlog included gross new business wins in the quarter of $622.2 million, cancellations of $121.7 million, a negative impact from foreign exchange rates of $29.7 million, and a downward backlog adjustment of $3.8 million related to dispositions in the Early Phase business. The net book-to-bill ratio was 1.50 in the quarter.
Mr. Josef H. von Rickenbach, PAREXEL's Chairman and Chief Executive Officer stated, "In the second quarter, we continued our positive momentum, demonstrating solid achievements in a number of key financial and operational areas. On a sequential basis, highlights included accelerated revenue growth for the Company overall, an improved operating margin, and earnings per share that were in line with our projections. Our progress was broad-based, with each of our three reporting segments delivering higher gross margins on a sequential basis. This was the result of improved operating leverage, further benefits of productivity and efficiency initiatives, and the impact of recent restructuring activities. We also generated healthy cash flow from operations, related in part to a substantial reduction in net receivables and a corresponding decrease in DSO."
Mr. von Rickenbach continued, "We are starting to hit our stride with recently-awarded strategic accounts, and with another quarter of strong new business wins in our backlog, I believe that we are well-positioned to deliver on our goals for Fiscal Year 2012. Operationally, we are committed to meeting the challenges of accelerating revenue growth, and we will continue to put into place the necessary resources to meet client and shareholder expectations for Fiscal Year 2012 and beyond."
The Company issued forward-looking guidance for the third quarter of Fiscal Year 2012 (ending March 31, 2012), for Fiscal Year 2012, and for Calendar Year 2012. The Company expects to report consolidated service revenue for the third quarter (ending March 31, 2012) in the range of $350 to $358 million, GAAP earnings per diluted share in the range of $0.28 to $0.30, and adjusted earnings per diluted share in the range of $0.30 to $0.32 (which exclude the impact of restructuring and related charges). For Fiscal Year 2012, consolidated service revenue is expected to be in the range of $1.360 to $1.375 billion, GAAP earnings per diluted share in the range of $1.01 to $1.09, and adjusted earnings per diluted share in the range of $1.09 to $1.17 (which exclude the impact of restructuring and related charges). Previously issued guidance for Fiscal Year 2012 was for service revenue in the range of $1.355 to $1.385 billion, GAAP earnings per diluted share in the range of $0.99 - $1.14, and adjusted earnings per diluted share in the range of $1.07 to $1.22 (which exclude the impact of restructuring and related charges). For Calendar Year 2012, consolidated service revenue is expected to be in the range of $1.445 to $1.480 billion, GAAP earnings per share are expected to be in the range of $1.31 to $1.47, and adjusted earnings per diluted share are expected to be in the range of $1.33 to $1.47 (excluding the impact of restructuring and related charges).
In addition to the financial measures prepared in accordance with generally accepted accounting principles (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 second quarter earnings, business, and financial outlook will begin at 10:00 a.m. ET on Tuesday, January 31, 2012 and will be broadcast live over the internet via webcast. The webcast may be accessed in the "Upcoming Events" portion of the main page of the Investor Relations 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 quarterly conference call.
The Company notes that Fiscal Year 2011 numbers have been reclassified to conform to the current year's presentation. A slide depicting the reclassified numbers for Fiscal Year 2011, in addition to other trended financial information, may be found in the Investor Relations section of the Company's website under the "Additional Financials" section.
About the Company
PAREXEL International Corporation is a leading global bio/pharmaceutical services organization, providing a broad range of knowledge-based contract research, consulting, and medical communications 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. Perceptive Informatics, Inc., a subsidiary of PAREXEL, provides advanced technology solutions, including medical imaging, to facilitate the clinical development process. Headquartered near Boston, Massachusetts, PAREXEL operates in 71 locations throughout 52 countries around the world, and has approximately 11,300 employees. For more information about PAREXEL International visit www.PAREXEL.com.
PAREXEL is a registered trademark of PAREXEL International Corporation, and Perceptive Informatics is a trademark of Perceptive Informatics, Inc. All other names or marks may be registered trademarks or trademarks of PAREXEL International Corporation, Perceptive Informatics, Inc. or their respective owners and are hereby acknowledged.
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 significantly 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 recent and anticipated restructurings, including the anticipated additional restructuring charges of approximately $2.0 million in the third quarter of Fiscal Year 2012; 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 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 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 September 30, 2011 as filed with the SEC on November 9, 2011, 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
Three Months Ended
(in thousands, except per share data)
December 31, 2011
December 31, 2010
As Reported
Adjustments
Non-GAAP
As Reported
Adjustments
Non-GAAP
Service revenue
$ 333,170
$ -
$ 333,170
$ 304,359
$ -
$ 304,359
Reimbursement revenue
54,641
54,641
59,691
59,691
Total revenue
387,811
-
387,811
364,050
-
364,050
Costs and expenses:
Direct costs
228,099
228,099
199,489
(a)
199,489
Reimbursable out-of-pocket expenses
54,641
54,641
59,691
59,691
Selling, general and administrative
64,358
64,358
61,182
(a)
61,182
Depreciation
14,752
14,752
13,605
13,605
Amortization
2,203
2,203
2,451
2,451
Restructuring charge (benefit)
1,162
(1,162)
(b)
-
(572)
572
(c)
-
Total costs and expenses
365,215
(1,162)
364,053
335,846
572
336,418
Income from operations
22,596
1,162
23,758
28,204
(572)
27,632
Other expense
(3,794)
-
(3,794)
(8,473)
1,166
(d)
(7,307)
Income before income taxes
18,802
1,162
19,964
19,731
594
20,325
Provision for income tax expense
5,862
233
(e)
6,095
2,899
199
(e)
3,098
Effective tax rate
31.2%
30.5%
14.7%
15.2%
Net income
$ 12,940
$ 929
$ 13,869
$ 16,832
$ 395
$ 17,227
Earnings per common share:
Basic
$0.22
$0.23
$0.29
$0.29
Diluted
$0.21
$0.23
$0.28
$0.29
Shares used in computing earnings per common share:
Basic
59,265
59,265
58,516
58,516
Diluted
60,249
60,249
59,686
59,686
(a) Prior year numbers have been reclassified to conform with the current year presentation.
(b) Restructuring charges include $1.7 million in severance costs and $0.5 million of facility-related costs, offset by a $1.0 million decrease in severance costs from an adjustment to the FY 2010 restructuring plan.
(c) Restructuring adjustments include $0.6 million in severance reductions.
(d) Impairment charge on an asset.
(e) Tax associated with items (b), (c), and (d), respectively.
Balance Sheet Information
Preliminary
December 31,
December 31,
June 30,
2011
2010
2011
Billed accounts receivable, net
$ 304,741
$ 311,377
$ 341,279
Unbilled accounts receivable, net
340,969
285,977
308,364
Deferred revenue
(373,952)
(285,576)
(332,662)
Net receivables
$ 271,758
$ 311,778
$ 316,981
Cash and marketable securities
$ 153,102
$ 87,552
$ 89,056
Working capital
$ 324,748
$ 217,170
$ 317,298
Total assets
$ 1,469,864
$ 1,356,032
$ 1,429,483
Short-term borrowings
$ 5,278
$ 110,019
$ 5,867
Long-term debt
$ 237,485
$ 172,230
$ 240,102
Stockholders' equity
$ 550,642
$ 516,714
$ 566,004
PAREXEL International Corporation
Consolidated Condensed Statement of Operations
Unaudited
Six Months Ended
Six Months Ended
(in thousands, except per share data)
December 31, 2011
December 31, 2010
As Reported
Adjustments
Non-GAAP
As Reported
Adjustments
Non-GAAP
Service revenue
$ 647,905
$ -
$ 647,905
$ 600,179
$ -
$ 600,179
Reimbursement revenue
100,555
-
100,555
106,128
-
106,128
Total revenue
748,460
-
748,460
706,307
-
706,307
Costs and expenses:
Direct costs
450,273
-
450,273
389,133
(a)
-
389,133
Reimbursable out-of-pocket expenses
100,555
-
100,555
106,128
-
106,128
Selling, general and administrative
125,347
-
125,347
122,040
(a)
-
122,040
Depreciation
29,033
-
29,033
26,856
-
26,856
Amortization
4,344
-
4,344
4,908
-
4,908
Restructuring charge (benefit)
3,862
(3,862)
(b)
-
(962)
962
(c)
-
Total costs and expenses
713,414
(3,862)
709,552
648,103
962
649,065
Income from operations
35,046
3,862
38,908
58,204
(962)
57,242
Other expense
(2,170)
-
(2,170)
(15,788)
1,166
(d)
(14,622)
Income before income taxes
32,876
3,862
36,738
42,416
204
42,620
Provision for income taxes
10,375
766
(e)
11,141
7,793
89
(e)
7,882
Effective tax rate
31.6%
30.3%
18.4%
18.5%
Net income
$ 22,501
$ 3,096
$ 25,597
$ 34,623
$ 115
$ 34,738
Earnings per common share:
Basic
$ 0.38
$ 0.43
$ 0.59
$ 0.59
Diluted
$ 0.37
$ 0.43
$ 0.58
$ 0.58
Shares used in computing earnings per common share:
Basic
59,154
59,154
58,483
58,483
Diluted
60,164
60,164
59,673
59,673
(a) Prior year numbers have been reclassified to conform with the current year presentation.
(b) Restructuring charges include $2.5 million in severance costs (net of a $1.0 million reduction in the FY10 Plan) and $1.4 million of facility-related costs.
(c) Restructuring adjustments include $0.8 million in severance reductions and $0.2 million in reductions of facility-related costs.
(d) Impairment charge on an asset.
(e) Tax associated with items (b), (c), and (d), respectively.
PAREXEL International Corporation
Segment Information
Unaudited
Three Months Ended
Three Months Ended
(in thousands)
December 31, 2011
December 31, 2010 (a)
Clinical Research Services (CRS)
Service revenue
$ 247,871
$ 231,364
% of total service revenue
74.4%
76.0%
Gross profit
$ 70,030
$ 73,842
Gross margin % of service revenue
28.3%
31.9%
PAREXEL Consulting & Medical Communications
Services (PCMS)
Service revenue
$ 38,455
$ 32,013
% of total service revenue
11.5%
10.5%
Gross profit
$ 15,871
$ 12,864
Gross margin % of service revenue
41.3%
40.2%
Perceptive Informatics (PI)
Service revenue
$ 46,844
$ 40,982
% of total service revenue
14.1%
13.5%
Gross profit
$ 19,170
$ 18,164
Gross margin % of service revenue
40.9%
44.3%
Total service revenue
$ 333,170
$ 304,359
Total gross profit
$ 105,071
$ 104,870
Gross margin % of service revenue
31.5%
34.5%
Revenue by Geography (b)
The Americas
$ 138,215
$ 127,194
Europe, Middle East & Africa
144,832
136,201
Asia/Pacific
50,123
40,964
Total service revenue
$ 333,170
$ 304,359
Quarterly Supplemental Financial Data
Service revenue
$ 333,170
$ 304,359
Reimbursement revenue
54,641
59,691
Investigator fees
54,609
50,003
Gross revenue
$ 442,420
$ 414,053
Days sales outstanding
57
69
Capital expenditures
$ 15,893
$ 16,023
(a) Prior year numbers have been reclassified to conform with the current year presentation.
(b) See footnote (b) on six months ended December 31st Segment Information table.
PAREXEL International Corporation
Segment Information
Unaudited
Six Months Ended
Six Months Ended
(in thousands)
December 31, 2011
December 31, 2010 (a)
Clinical Research Services (CRS)
Service revenue
$ 483,280
$ 463,003
% of total service revenue
74.6%
77.1%
Gross profit
$ 132,689
$ 154,498
Gross margin % of service revenue
27.5%
33.4%
PAREXEL Consulting & Medical Communications
Services (PCMS)
Service revenue
$ 74,103
$ 60,348
% of total service revenue
11.4%
10.1%
Gross profit
$ 30,541
$ 23,977
Gross margin % of service revenue
41.2%
39.7%
Perceptive Informatics (PI)
Service revenue
$ 90,522
$ 76,828
% of total service revenue
14.0%
12.8%
Gross profit
$ 34,402
$ 32,571
Gross margin % of service revenue
38.0%
42.4%
Total service revenue
$ 647,905
$ 600,179
Total gross profit
$ 197,632
$ 211,046
Gross margin % of service revenue
30.5%
35.2%
Revenue by Geography (b)
The Americas
$ 278,255
$ 260,085
Europe, Middle East & Africa
267,991
261,730
Asia/Pacific
101,659
78,364
Total service revenue
$ 647,905
$ 600,179
(a) Prior year numbers have been reclassified to conform with the current year presentation.
(b) As reflected in the six month totals, the regional breakout of revenue for Q1 FY12 has been adjusted: The Americas revenue was $140,040; EMEA revenue was $123,159; and Asia/Pacific revenue was $51,536.
CONTACTS:
James Winschel, Senior Vice President and Chief Financial Officer
Jill Baker, Corporate Vice President, Investor Relations
+1-781-434-4118
