Buoyed by strong revenue growth and significantly lighter restructuring charges, Parexel International reported operating income of $25.5 million for the final quarter of its 2012 fiscal year, more than 16 times the income of US$1.6 million recorded in the fourth quarter of FY 2011.
Parexel took a restructuring charge of US$8.9 million in the 2011 quarter, compared with a charge of just US$574,000 in the latest reporting period. The difference carried through to the company’s operating margin, which was 6.5% of consolidated service revenue in the fourth quarter of FY 2012 and 0.5% in the year-before quarter.
Service revenue (excluding reimbursement revenue) for the final quarter of FY 2012 was US$292.6 million, up by 26.4% year on year.
Without counting the negative impact of exchange-rate fluctuations, as well some $0.5 million of revenue earned during Q4 2011 from subsequently divested Phase I units, revenue growth for the latest quarter would have been 28.7%, Parexel noted.
All of the US-based biopharmaceutical services provider’s three business segments showed healthy revenue growth, although gross margins shrank in two of them.
In the largest of these segments, Clinical Research Services (CRS), service revenues increased by 25.4% to US$292.0 million, while the gross margin was 24.5% compared with 27.9% in the fourth quarter of fiscal 2011.
Margins did improve in Parexel Consulting & Medical Communications Services (PCMS), where service revenues were 41.1% higher at US$49.7 million. The gross margin widened from 40.9% to 41.9% in the latest quarter.
The advanced technology solutions business, Perceptive Informatics (PI), recorded a 19.7% increase in service revenues, to US$50.8 million. But the gross margin narrowed to 39.4% from 42.9% in Q4 of fiscal 2011.
Overall, diluted earnings per share (EPS) were US$0.29 in the latest quarter, compared with a loss of US$0.03 (diluted) in the year-before period.
Without any special items, diluted EPS would have been US$0.10 in the fourth quarter of fiscal 2011 and US$0.34 in Q4 2012. The more recent figure topped the reported consensus estimate of US$0.29 per share from analysts polled by Thomson Reuters.
Parexel also beat the consensus forecast with its fourth-quarter service revenues of US$392.6 million. Analysts were looking for revenues of US$377.88 million.
Backlog, book to bill
Parexel reported an end-of-year backlog of US$4.394 billion, 27.6% more than at the end of fiscal year 2011.
The figure included gross new business wins of US$822.4 million in the fourth quarter, cancellations of US$220.5 million and a negative impact of US$39.0 million from exchange-rate translation.
The net book-to-bill ratio was 1.53 for the last quarter of FY 2012 and 1.76 for the whole of the fiscal year.
Watershed yearJosef von Rickenbach, Parexel’s chairman and chief executive officer, described FY 2012 as “a watershed year for our industry, and a defining year for Parexel”.
The company’s differentiated product offerings “have clearly resonated with clients, and we are a winner in a profoundly changed competitive landscape”, he added.
Rickenbach said Parexel would continue to be “highly focused” on client satisfaction and margin improvement going forward.
“We expect hiring needs to moderate over the course of the fiscal year, and to generate increasing productivity and efficiency from the more than 2,000 additional new employees who joined us during Fiscal Year 2012,” he commented.
Parexel also has a number of “well-defined” margin improvement initiatives underway, which “we believe will enable us to profitably convert our backlog and help us to deliver long-term sustainable growth in revenue and margins”, Rickenbach predicted.
The company has signalled its confidence in these prospects by announcing a stock repurchase programme for up to US$200 million worth of Parexel common stock, subject to the agreement of the company’s lenders.
It has also raised its guidance for consolidated service revenue in the next fiscal year to a range of US$1.630 billion to US$1.660 billion, compared with the previous forecast of US$1.625 billion to US$1.655 billion.