After tightening up its financial guidance for fiscal year 2012 at the second-quarter stage, Parexel was on a more bullish track in the three months ended 31 March, raising its revenue forecast for the year and outpacing analysts’ expectations as operating income jumped 29% despite continuing restructuring charges.
However, the US-based biopharmaceutical services provider further narrowed its guidance for earnings per share (EPS) in FY 2012, as strong new-business gains and accelerated revenue pushed up resourcing needs beyond previously assumptions.
“Looking forward, we continue to focus intensely on execution to service the substantial book of new business that we have in backlog,” said Josef von Rickenbach, chairman and chief executive officer of Parexel International.
“In the coming quarters, we expect to continue to achieve healthy revenue growth for the Company, while at the same time we make further investments in delivery capacity to service client projects.”
Revenue growth
Consolidated service revenues (which exclude reimbursement revenue) for the third quarter of fiscal year 2012 were up by 18.1% year on year to US$356.0 million, beating the reported analyst consensus of US$352.2 million cited by Thomson Reuters.
Revenues grew by 16.0% to US$263.4 million in the Clinical Research Services segment, by 26.8% to US$43.3 million in Parexel Consulting and Medical Communications Services and by 22.5% to US$49.3 million in the advanced technology solutions business, Perceptive Informatics.
Income from operations for Q3 FY 2012 rose by 29.1% year on year to US$28.2 million, despite a restructuring charge of US$1.81 million in the latest quarter (US$144,000 in Q3 2011) that included US$2.0 million in severance costs, offset by a US$0.2 million reduction in facilities costs.
Earnings per diluted share (EPS) for the three months ended 31 March 2012 were US$0.38, 46.2% higher than in the third quarter of FY 2011. Stripping out the restructuring charge and a US$4.81 million tax benefit in the latest quarter, diluted EPS were US$0.33 (+22.2%), above the quoted analyst consensus of US$0.31.
Backlog, book to bill
Backlog at the end of March 2012 was around $4.22 billion, an increase of 32.5% year on year.
It included gross new business wins of $1.06 billion during the quarter, cancellations of $263.3 million, and a positive impact of $44.3 million from foreign exchange rates and other small adjustments. The net book-to-bill ratio for the third quarter was 2.23.
Revised guidance
Consolidated service revenues for the full year are now expected to reach US$1.380 billion to US$1.385 billion, with diluted EPS coming in at US$1.03 to US$1.05 and adjusted EPS (which exclude the impact of restructuring and related charges as well as certain Q3 FY12 tax benefits) at US$1.04 to US$1.06.
The previously issued guidance for fiscal year 2012 (given at the second-quarter stage) was for consolidated service revenues in the range of US$1.360 billion to US$1.375 billion, diluted EPS of US$1.01 to US$1.09 and adjusted EPS of US$1.09 to US$1.17.
Given the increased resourcing requirements noted above, Parexel expects its operating margin to thin out in the short term. The projection is for an operating margin of 7.5% to 8.0% in the fourth quarter of FY 2012, which should expand during the second half of fiscal year 2013.
“The Company’s strong performance in the third quarter reflected the progress that we’ve made on many fronts,” von Rickenbach commented.
“I believe that system enhancements and operational improvement initiatives in the Clinical Research Services segment, focused on improving margins and further increasing client satisfaction, are taking root.”
