ICON, the global provider of outsourced development services based in Ireland, is expecting revenues and earnings per share for 2010 to be at the lower end of previously issued guidance.
Delivering a subdued set of results for the second quarter, ICON reported operating income for the quarter down by 12.3% on a comparable basis to US$25.7 million, as net revenues improved by 1.8% year on year to US$224 million.
Exchange rate fluctuations took some of the edge off the revenue performance: on a constant currency basis, revenues would have been up by 3.1%. EMEA countries (Europe, the Middle East and Africa) contributed 47% of net revenues in the latest quarter, compared with 41% in the same period last year. The US accounted for 43% of revenues (51% in Q2 2009) and Asia Pacific/Latin American countries for 10% (8%).
The operating income of US$29.3 million registered for the second quarter of 2009 was before one-time net charges. On the same basis, the operating margin for Q2 2009 was 13.3% and it shrank to 11.5% (11.8% without the currency impact) in the latest quarter.
Net income for the second quarter of 2010 was US$22.9 million compared with US$22.8 million in the year-ago quarter, while diluted earnings per share (EPS) were flat year on year at US$0.38. Analysts polled by Thomson Reuters had been looking for EPS of US$0.37 on revenues of $224 million in the latest quarter.
ICON’s chief executive officer, Peter Gray, highlighted the net bookings of US$320 million in the second quarter (US$266 million in Q2 2009) as “particularly satisfying”, giving a strong book-to-bill ratio of 1.4. Backlog grew to US$1.90 million from US$1.83 million in the first quarter of 2010 and US$1.86 million in the second quarter of US$1.86 million.
“However, we are not expecting revenue growth to respond quickly to these awards, and as a result we now anticipate that the outcome for 2010 will be at the lower end of the guidance range given in February,” Gray added.
Presenting its fourth-quarter and annual results last February, ICON issued revenue guidance for 2010 in the range of US$890 – US$940 million and EPS guidance of US$1.44 – US$1.60.
Despite ICON’s muted forecast, Morningstar analyst Lauren Migliore saw the wider outlook for contract research organisations as encouraging.
“While the contract research industry remains under pressure, we are encouraged by the resurgence of strong bookings among top-tier providers,” she commented. “We think robust growth will return in 2011 for the major contract research players, fuelled by an uptick in outsourcing penetration and further market share gains at the expense of smaller providers.”
