Restructuring costs of US$4.8 million plunged ICON, the global provider of outsourced development services based in Ireland, into an operating loss of US$3.68 million for the third quarter ended 30 September 2011.
That compared with operating income of US$17.6 million for the same three months last year. More encouragingly, net revenues in the latest quarter were up by 7.0% year on year to US$240.8 million, while new chief executive officer (CEO) Ciaran Murray said ICON’s success in developing strategic partnerships had led to record net new business worth US$431 million for Q3.
The company reported a net loss of US$2.66 million, or US$0.04 per diluted share, for the three months to end of September 2011, against net income of US$19.9 million, or US$0.33 per diluted share, in last year’s quarter.
Without the restructuring charges, ICON would have reported net income of US$0.02 per diluted share for Q3 2011, broadly in line with analysts’ estimates, and operating income of US$1.13 million.
ICON revealed that its initial cash consideration for acquiring site performance-management specialist Firecrest Clinical, a deal announced in July, was US$24.4 million.
The company had given a forewarning of cost pressures at the second-quarter stage, when then CEO Peter Gray noted that ICON was stepping up its hiring drive to accommodate its recently announced five-year strategic alliance with Pfizer for clinical trial implementation services.
This was expected to “add significant cost in the next two quarters as we gear up to handle work which will be transitioned to us in Q4 and throughout 2012”, Gray commented at the time.
ICON also pruned back its guidance for earnings per share (EPS) in 2011 from the range of US$1.10 to US$1.25 given with the annual results in March to US$0.50-US$0.70, reflecting the sharp rise in costs associated with gearing up for the Pfizer partnership.
500 extra staff
As Murray noted, ICON added some 500 staff during the third quarter to “position ourselves for the future growth that will result from our backlog increasing by 16% over last year”.
This had an impact on profitability, with the restructuring charges – comprising “a number of cost reduction steps” during the quarter – compounding the damage.
Murray said ICON would “continue to invest in both our existing business and in our strategic relationships to provide quality services to our customers”.
Revenue growth for 2012 is expected to be in the region of 15-20%, while the projected EPS range is US$0.90 to US$1.10.
The ICON board has also approved a share buyback programme worth up to US$50 million, which will start in the fourth quarter.
Book to billThe net business wins of US$431 million for the third quarter represented a net book to bill ratio of 1.8. ICON’s backlog grew by 16% year on year during the quarter to US$2.2 billion.