- Published: 26 January 2010
- Written by Editor
PAREXEL Reports Second Quarter Fiscal Year 2010 Financial Results
PAREXEL International Corporation (Nasdaq: PRXL) today announced its financial results for the second quarter ended December 31, 2009.
For the three months ended December 31, 2009, PAREXEL's consolidated service revenue increased 3.2% to $284.7 million compared with $275.8 million in the prior year period. Excluding the positive impact of foreign exchange of $14.0 million dollars in the quarter, revenue decreased approximately 2% from the prior year. Operating income as reported under Generally Accepted Accounting Principles (GAAP) totaled $18.7 million, or 6.6% of consolidated service revenue in the second quarter of Fiscal Year 2010, as compared with $7.7 million, or 2.8% of consolidated service revenue in the same period one year ago. Excluding the impact of restructuring related items in the quarter, as detailed below and in the attached financial tables, operating income was $26.9 million, or 9.5% of consolidated service revenue, in the second quarter of Fiscal Year 2010.
This contrasts with non-GAAP operating income of $22.7 million, or 8.2% of consolidated service revenue, in the comparable quarter of the prior year (adjusted prior period numbers do not include the impact from a client's default on a contract). GAAP net income for the quarter totaled $3.5 million, or $0.06 per diluted share, compared with net income of $5.2 million, or $0.09 per diluted share, for the quarter ended December 31, 2008. On a non-GAAP basis, excluding certain items in both periods that are detailed in the attached financial tables, net income for the second quarter was $15.1 million, or $0.26 per diluted share, as compared with net income of $13.1 million or $0.23 per share in the prior year period.
During the December 2009 quarter, the Company incurred net restructuring and related charges of $14.3 million, including costs for severance and the abandonment of facilities, as well as a $6.1 million charge for the impairment of an investment, partly offset by a recovery related to a prior charge. The impairment charge was a non-cash, non-tax deductible amount which caused the total impact of the charges to be $0.20 cents per diluted share rather than the previously-estimated $0.15 cents per diluted share.
On a segment basis, consolidated service revenue for the second quarter of Fiscal Year 2010 was $221.6 million in Clinical Research Services (CRS), $29.7 million in PAREXEL Consulting and Medical Communications Services (PCMS), and $33.4 million in Perceptive Informatics, Inc.
For the six months ended December 31, 2009, consolidated service revenue was $544.5 million versus $538.9 million in the prior year period, an increase of 1.0%. GAAP operating income for the current six-month period was $37.2 million, or 6.8% of service revenue, compared with GAAP operating income of $29.7 million, or 5.5% of service revenue in the prior year period. Net income on a GAAP basis for the six months ended December 31, 2009 was $15.9 million, or $0.27 per diluted share, compared with GAAP net income of $18.8 million, or $0.32 per diluted share, in the prior year period. On a non-GAAP basis, excluding certain items in both periods that are detailed in the attached financial tables, operating income for the six months ended December 31, 2009 was $45.4 million, or 8.3% of consolidated service revenue, compared with $44.7 million, or 8.3% of consolidated service revenue in the comparable six-month period of the prior year. On a non-GAAP basis, excluding items in both periods that are detailed in the attached financial tables, net income for the six months ended December 31, 2009 was $27.6 million, or $0.47 per diluted share, as compared with net income of $26.7 million or $0.46 per share in the prior year period.
PAREXEL's backlog was approximately $2.31 billion at the end of the December quarter, an increase of 15.1% year-over-year. The reported backlog included gross new business wins of $501.7 million, cancellations of $98.9 million, and a positive impact from foreign exchange rates of $33.9 million. The net book-to-bill ratio was 1.41 in the quarter (defined as gross new business less cancellations divided by service revenue).
Mr. Josef H. von Rickenbach, PAREXEL's Chairman and Chief Executive Officer stated, "Our results for the December quarter capped a solid and positive finish to a challenging year. A strong performance on the new business front drove substantive backlog gains, with increases across all three reporting segments. We also continued to improve operating margins, and expect further margin expansion in the coming quarters, as the benefits of restructuring activities and other productivity and efficiency initiatives begin to take hold."
Mr. von Rickenbach continued, "We believe that our achievements on the new business front clearly derive from the successful execution of our strategy, which is to serve our clients as a leading expertise-based global provider of clinical development services and technologies. Market demand has been picking up across all geographies in the Late Phase portion of our Clinical Research Services business, as well as in our Perceptive Informatics segment. These demand trends should continue to drive further revenue growth and profitability improvement. Going forward, we anticipate that a number of broad industry dynamics will benefit PAREXEL, including the completion of several large pharmaceutical company mergers, increased partnering activities and outsourcing penetration rates, a return of funding to mid and small biopharma clients, and the heightened focus of our clients on moving promising compounds through the later stages of the development process."
The Company issued forward-looking guidance for the third quarter of Fiscal Year 2010 (ending March 31, 2010), for Fiscal Year 2010 and for Calendar Year 2010 using recent exchange rates. Adjusted diluted earnings per share guidance numbers exclude restructuring and related charges. The Company expects to record an additional $14 million in restructuring charges during the third quarter of Fiscal Year 2010, equating to approximately $0.14 per diluted share. For the third quarter, the Company anticipates reporting consolidated service revenue in the range of $288 to $293 million, GAAP earnings per diluted share in the range of $0.11 to $0.14, and adjusted earnings per share of $0.25 to $0.28. For Fiscal Year 2010, consolidated service revenue is expected to be in the range of $1.125 to $1.145 billion, GAAP earnings per diluted share to be in the range of $0.66 to $0.72, and adjusted diluted earnings per share to be in the range of $1.00 to $1.06. (Previously issued guidance for Fiscal Year 2010 was for service revenue of $1.115 to $1.145 billion, GAAP diluted earnings per share of $0.60 to $0.70, and adjusted earnings per diluted share of $0.90 to $1.00). For Calendar Year 2010, consolidated service revenue is expected to be in the range of $1.175 to $1.215 billion, GAAP earnings per diluted share are projected to be in the range of $0.91 to $1.05, and adjusted earnings per share are projected to be in the range of $1.05 to $1.19. (Previously issued guidance for Calendar Year 2010 was for service revenue of $1.170 to $1.215 billion, GAAP earnings per diluted share of $0.85 to $1.00, and adjusted earnings per diluted share of $1.00 to $1.15).
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 26, 2010 and will be broadcast live over the internet via webcast. The webcast may be accessed in the "Webcasts" portion 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 +1 706-758-4950 and ask to join the PAREXEL quarterly conference call.
Certain 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, medical communications and consulting 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 50 countries around the world, and has approximately 9,200 employees. For more information about PAREXEL International visit www.PAREXEL.com.
This release contains "forward-looking" statements regarding future results and events, including, without limitation, statements regarding expected financial results, future growth and customer demand, such as the guidance provided by the Company with respect to the third quarter of Fiscal Year 2010, Fiscal Year 2010, and Calendar Year 2010. 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," "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 restructuring charge of approximately $30 million over the second and third quarters of Fiscal Year 2010; 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, 2009 as filed with the SEC on November 6, 2009 which "Risk Factors" discussion is incorporated by reference in this press release. The forward-looking statements included in this press release represent the Company's estimates as of the date of this 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.
James Winschel, Senior Vice President and Chief Financial
CONTACTS: Officer
Jill Baker, Vice President of Investor Relations
+1-781-434-4118
Three Months Ended
(in thousands, except
per share data) December 31, 2009
As Reported Adjustments Non-GAAP
Service revenue $284,731 $284,731
Reimbursement revenue 53,249 53,249
Total revenue 337,980 337,980
Costs and expenses:
Direct costs 178,237 178,237
Reimbursable out-of-
pocket expenses 53,249 53,249
Selling, general and
administrative 64,498 64,498
Depreciation 13,151 (514) (a) 12,637
Amortization 2,447 2,447
Other (benefit) charge (1,144) 1,144 (b) -
Restructuring expense 8,831 (8,831) (a) -
Total costs and
expenses 319,269 (8,201) 311,068
Income from operations 18,711 8,201 26,912
Other (expense) income (9,944) 6,142 (c) (3,802)
Income before income
taxes 8,767 14,343 23,110
Provision for income
taxes 5,317 2,667 (d) 7,984
Effective tax rate 60.6% 34.5%
Net income $3,450 $11,676 $15,126
Earnings per common
share:
-------------------
Basic $0.06 $0.26
Diluted $0.06 $0.26
Shares used in
computing earnings
per common share:
-------------------
Basic 57,933 57,933
Diluted 58,073 58,073
Three Months Ended
(in thousands, except
per share data) December 31, 2008
As Reported Adjustments Non-GAAP
Service revenue $275,846 $275,846
Reimbursement revenue 48,155 48,155
Total revenue 324,001 324,001
Costs and expenses:
Direct costs 177,295 177,295
Reimbursable out-of-
pocket expenses 48,155 48,155
Selling, general and
administrative 62,062 62,062
Depreciation 11,305 11,305
Amortization 2,474 2,474
Other (benefit) charge 15,000 (15,000) (b) -
Restructuring expense - -
Total costs and
expenses 316,291 (15,000) 301,291
Income from operations 7,710 15,000 22,710
Other (expense) income 2,642 2,642
Income before income
taxes 10,352 15,000 25,352
Provision for income
taxes 5,144 7,080 12,224
Effective tax rate 49.7% 48.2%
Net income $5,208 $7,920 $13,128
Earnings per common
share:
-------------------
Basic $0.09 $0.23
Diluted $0.09 $0.23
Shares used in
computing earnings
per common share:
-------------------
Basic 57,634 57,634
Diluted 57,634 57,634
(a) Restructuring charges pursuant to plans announced or implemented
in Q2 FY10 include $0.5 million of accelerated depreciation on
abandoned facilities, $5.2 million of facility-related costs and
$3.6 million in severance costs.
(b) Release of $1.1 million in certain reserves related to the $15
million wind-down costs and bad debt expense established in Q2 FY09
for a client contract default.
(c) Investment impairment charge.
(d) Tax benefit associated with items a-c.
Balance Sheet Information Preliminary
-------------------------
Dec. 31, June 30, Dec. 31,
2009 2009 2008
---- ---- ----
Billed accounts
receivable, net $250,378 $251,174 $259,065
Unbilled accounts
receivable, net 248,778 230,146 202,019
Deferred revenue (287,930) (266,453) (238,370)
-------- -------- --------
Net receivables $211,226 $214,867 $222,714
======== ======== ========
Cash and marketable
securities $118,847 $96,352 $63,678
Working capital $198,461 $191,705 $143,788
Total assets $1,246,994 $1,224,461 $1,123,131
Short-term borrowings $32,077 $32,090 $50,424
Long-term debt $220,330 $247,083 $226,871
Stockholders' equity $441,229 $414,745 $373,546
Six Months Ended
(in thousands, except
per share data) December 31, 2009
-----------------
As Reported Adjustments Non-GAAP
----------- ----------- --------
Service revenue $544,494 $544,494
Reimbursement revenue 101,024 101,024
------- -------
Total revenue 645,518 645,518
Costs and expenses:
Direct costs 345,066 345,066
Reimbursable out-of-
pocket expenses 101,024 101,024
Selling, general and
administrative 124,851 124,851
Depreciation 24,720 (514) (a) 24,206
Amortization 4,983 4,983
Other (benefit)
charge (1,144) 1,144 (b) -
Restructuring expense 8,831 (8,831) (a) -
----- ------ ---
Total costs and
expenses 608,331 (8,201) 600,130
Income from
operations 37,187 8,201 45,388
Other (expense)
income (10,724) 6,142 (c) (4,582)
------- ----- ------
Income before income
taxes 26,463 14,343 40,806
Provision for income
taxes 10,572 2,667 (d) 13,239
Effective tax rate 40.0% 32.4%
Net income $15,891 $11,676 $27,567
======= ======= =======
Earnings per common
share:
-------------------
Basic $0.27 $0.48
Diluted $0.27 $0.47
Shares used in
computing earnings
per common share:
-------------------
Basic 57,874 57,874
Diluted 58,104 58,104
Six Months Ended
(in thousands,
except per share
data) December 31, 2008
-----------------
As Reported Adjustments Non-GAAP
----------- ----------- --------
Service revenue $538,892 $538,892
Reimbursement
revenue 104,661 104,661
------- -------
Total revenue 643,553 643,553
Costs and expenses:
Direct costs 348,659 348,659
Reimbursable out-
of-pocket
expenses 104,661 104,661
Selling, general
and administrative 119,787 119,787
Depreciation 21,234 21,234
Amortization 4,509 4,509
Other (benefit)
charge 15,000 (15,000) (b) -
Restructuring
expense - -
--- ---
Total costs and
expenses 613,850 (15,000) 598,850
Income from
operations 29,703 15,000 44,703
Other (expense)
income 1,964 1,964
----- -----
Income before
income taxes 31,667 15,000 46,667
Provision for
income taxes 12,840 7,080 19,920
Effective tax rate 40.5% 42.7%
Net income $18,827 $7,920 $26,747
======= ====== =======
Earnings per common
share:
-------------------
Basic $0.33 $0.46
Diluted $0.32 $0.46
Shares used in
computing earnings
per common share:
-------------------
Basic 57,552 57,552
Diluted 58,171 58,171
(a) Restructuring charges pursuant to plans announced or implemented
in Q2 FY10 include $0.5 million of accelerated depreciation on
abandoned facilities, $5.2 million of facility-related costs and
$3.6 million in severance costs.
(b) Release of $1.1 million in certain reserves related to the $15
million wind-down costs and bad debt expense established in Q2 FY09
for a client contract default.
(c) Investment impairment charge.
(d) Tax benefit associated with items a-c.
PAREXEL International Corporation
Segment Information
Unaudited
Three Months Ended Three Months Ended
(in thousands) December 31, 2009 December 31, 2008
----------------- -----------------
Clinical Research
Services (CRS)
Service revenue $221,570 $200,934
% of total service
revenue 77.8% 72.8%
Gross profit $82,419 $70,207
Gross margin % of
service revenue 37.2% 34.9%
PAREXEL Consulting
& Medical
Communications
Services (PCMS)
Service revenue $29,731 $31,931
% of total service
revenue 10.4% 11.6%
Gross profit $10,749 $11,164
Gross margin % of
service revenue 36.2% 35.0%
Perceptive
Informatics, Inc.
(PII)
Service revenue $33,430 $42,981
% of total service
revenue 11.8% 15.6%
Gross profit $13,326 $17,180
Gross margin % of
service revenue 39.9% 40.0%
Total service
revenue $284,731 $275,846
Total gross profit $106,494 $98,551
Gross margin % of
service revenue 37.4% 35.7%
Revenue by
Geography
----------
The Americas $108,913 $121,560
Europe, Middle
East & Africa 142,459 131,533
Asia/Pacific 33,359 22,753
------ ------
Total service
revenue $284,731 $275,846
======== ========
Quarterly
Supplemental
Financial Data
---------------
Total revenue $337,980 $324,001
Investigator fees 50,672 48,739
------ ------
Gross revenue $388,652 $372,740
======== ========
Days sales
outstanding 50 55
Capital
expenditures 14,454 21,388
PAREXEL International Corporation
Segment Information
Unaudited
Six Months Ended Six Months Ended
December 31,
(in thousands) 2009 December 31, 2008
------------- -----------------
Clinical Research
Services (CRS)
Service revenue $423,894 $403,757
% of total service
revenue 77.9% 74.9%
Gross profit $155,461 $141,128
Gross margin % of
service revenue 36.7% 35.0%
PAREXEL Consulting &
Medical Communications
Services (PCMS)
Service revenue $58,552 $62,042
% of total service
revenue 10.8% 11.5%
Gross profit $21,139 $21,112
Gross margin % of
service revenue 36.1% 34.0%
Perceptive Informatics,
Inc. (PII)
Service revenue $62,048 $73,093
% of total service
revenue 11.3% 13.6%
Gross profit $22,828 $27,993
Gross margin % of
service revenue 36.8% 38.3%
Total service revenue $544,494 $538,892
Total gross profit $199,428 $190,233
Gross margin % of
service revenue 36.6% 35.3%
Revenue by Geography
--------------------
The Americas $210,514 $223,891
Europe, Middle East &
Africa 271,999 271,920
Asia/Pacific 61,981 43,081
------ ------
Total service revenue $544,494 $538,892
======== ========
