In the company’s first quarterly-results announcement since it returned to public ownership in May, Quintiles Transnational reported operating income down by 5.9% year on year for the three months ended 30 June 2013, on service revenues that were virtually flat against last year’s quarter.
However, operating income and the resulting earnings per share (EPS, down by 25.0% as reported) were markedly affected by management fees as well as other one-off costs during Q2 2013.
Without these, Quintiles was ahead of analysts’ estimates for both net earnings and service revenues in the second quarter.
Moreover, net new business wins were up by 13% in the quarter and Quintiles is forecasting adjusted earnings above the quoted analyst consensus for the full year.
Second IPO
The US-based provider of biopharmaceutical development and commercial outsourcing services recently raised US$947.4 million in its second initial public offering since the company was set up in 1982.
Net proceeds to Quintiles from the IPO, after deducting underwriting discounts, commissions and related expenses, were about US489.9 million.
Of that total, around US$308.9 million was used to pay off a US$300 million term loan; roughly US$50.0 million to repay debts under Quintiles’ senior secured-credit facilities; and US$25.0 million for a one-time fee terminating a management agreement with affiliates of certain shareholders.
The management fee was taken in the second quarter, as was a loss on debt extinguishment of US$16.5 million.
Q2 revenues
Quintiles generated service revenues of US$944.2 million in the latest quarter, compared with revenues of US$944.9 million in the second quarter of 2012.
Analysts polled by Thomson Reuters had been expecting service revenues of US$942.9 million in Q2 2013.
The impact on revenues of unfavourable exchange rates during the latest quarter was 2.3% or US$21.8 million, Quintiles noted. At constant currency rates, service revenues for the second quarter grew by 2.2% year on year.
Operating income for the quarter was US$94.9 million, down from US$100.9 million one year previously.
Stripping out the various special items gave adjusted income from operations of U$124.1 million, 8.4% higher than in the second quarter of 2012, and diluted earnings per share of US$0.50 (US$0.47 in Q2 2012) versus US$0.30 before adjustments.
The analyst consensus for diluted earnings per share (without special items) in the latest quarter was US$0.46.
New business
Net new business reached US$1.0 billion in Q2, giving Quintiles its fourth consecutive quarter in which new business wins were worth US$1.0 billion or more.
The company’s book-to-bill ratio (net new business divided by service revenues) was 1.07 for the second quarter and 1.21 for the six-month period ended 30 June 2013.
Quintiles “delivered solid results overall with continued strength in new business wins”, commented chief executive officer Tom Pike.
“We have maintained the momentum following our initial public offering in May, which we believe demonstrates the confidence our customers have in us as well as the depth and diversity of our customer base.”
2013 guidance
Quintiles’ guidance for service revenues in the whole of 2013 is between US$3.76 billion and US$3.81 billion, representing constant currency growth of 3.8% to 5.2%.
The company is forecasting diluted adjusted earnings per share of US$1.95 to US$2.05 (+10.2% to +15.5% year on year) and actual diluted EPS of between US$1.63 and US$1.73 per share,
Analysts, who usually ignore special items, are looking for earnings of US$1.88 per share on revenues of $3.81 billion in 2013, according to the Thomson Reuters consensus.
