Parexel International has tightened up its financial projections for fiscal 2012 after reporting operating income down by 19.9% year on year for the second quarter.
As in the last few quarters, though, restructuring charges muddied the picture. In the three months ended 31 December 2011, these came to US$1.16 million compared with a restructuring benefit of US$572,000 in the second quarter of fiscal 2011.
In the latest quarter, the restructuring charges included US$1.7 million in severance costs and US$500,000 in facility-related costs, offset by a US$1.0 million reduction in severance costs from an adjustment to Parexel’s FY 2010 restructuring plan.
Leaving the charges out, Parexel matched the analyst consensus for earnings per share of US$0.23 in the second quarter, while quarterly service revenues were 9.5% ahead year on year at US$333.2 million. The analyst consensus for revenues was a little higher, at around US$334.3 million.
Josef von Rickenbach, chairman and chief executive officer of the US-based biopharmaceutical service organisation, was relatively bullish, saying Parexel was “starting to hit our stride with recently-awarded strategic accounts”.
With another quarter of strong new business wins under its belt, “I believe that we are well-positioned to deliver on our goals for fiscal year 2012”, von Rickenbach added.
Restructuring hit
Taking into account the restructuring and related charges, operating income for the quarter ended 31 December 2011 was US$22.6 million against US$28.2 million in the year-before period. Without the charges, operating income for Q2 of FY 2012 was 14.0% lower year on year at US$23.8 million.
On the same basis, diluted earnings per share were US$0.21 in the latest quarter versus US$0.28 one year earlier. Adjusted EPS for Q2 2012 were, as previously mentioned, US$0.23 and in the second quarter of fiscal 2011 they were US$0.29.
On the revenue front, Clinical Research Services made up the bulk of the quarterly figure, with consolidated service revenues increasing by 6.7% to US$247.9 million.
Parexel Consulting and Medical Communications generated service revenues of US$38.5 million (+16.8% year on year) and the Perceptive Informatics unit was 12.5% ahead at US$46.8 million.
Positive momentum
According to von Rickenbach, Parexel “continued our positive momentum” during the second quarter, demonstrating “solid achievements in a number of key financial and operational areas”.
On a quarter-to-quarter basis, highlights included accelerated revenue growth, an improved operating margin and earnings per share in line with the company’s own projections, von Rickenbach noted.
“Our progress was broad-based, with each of our three reporting segments delivering higher gross margins on a sequential basis,” he added.
“This was the result of improved operating leverage, further benefits of productivity and efficiency initiatives, and the impact of recent restructuring activities.”
Backlog up 24%
Backlog at the end of December was around US$3.74 billion, an increase of 23.8% year-over-year.
The figure included gross new business wins of US$622.2 million during the second quarter, cancellations of US$121.7 million, a negative impact of US$29.7 million from foreign exchange rates, and a backlog adjustment of minus US$3.8 million related to disposals in the Early Phase business.
The net book-to-bill ratio for the second quarter of fiscal 2012 was 1.50.
Parexel’s revised financial projections for the full year are that consolidated service revenue will be in the range of US$1.360 billion to US$1.375 billion, with earnings per diluted share coming in at US$1.01 to US$1.09, and adjusted EPS at US$1.09 to US$1.17 (excluding the impact of restructuring and related charges).
