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PAREXEL International Reports Second Quarter Fiscal Year 2014 Results

Companies mentioned in this article: PAREXEL International Corporation

BOSTON, Jan. 29, 2014 /PRNewswire/ -- PAREXEL International Corporation (NASDAQ: PRXL) today reported financial results for the second quarter of Fiscal Year 2014, which ended on December 31, 2013.

In commenting on the results of the quarter, Mr. Josef H. von Rickenbach, PAREXEL's Chairman and Chief Executive Officer, stated, "In the second quarter we met our goals and made progress on our key initiatives. We delivered strong revenue growth, healthy operating margin expansion, and solid cash flow from operations. We were also particularly pleased with our new business performance. Wins were broad-based across our businesses, and came from a variety of client segments."

Mr. von Rickenbach continued, "I believe the market for our products and services continues to be strong. We remain focused on successfully competing in the marketplace, executing projects with high quality, and driving efficiency initiatives throughout our businesses. We expect these activities to propel profitable growth and increase shareholder value. Our financial and operational performance in the second quarter, together with solid demand for our services, gives us the confidence that we will achieve our financial goals for Fiscal Year 2014."

For the three months ended December 31, 2013 consolidated service revenue increased by 15.4% to $487.1 million compared with $422.1 million in the prior year period. The impact from foreign exchange movements in the quarter was nominal. Recent acquisitions contributed approximately $14 million to revenue in the quarter. On a constant currency, same store basis, revenue growth was 12.2% year-over-year. Operating income as reported under Generally Accepted Accounting Principles (GAAP) totaled $46.7 million, or 9.6% of service revenue, in the second quarter of Fiscal Year 2014, as compared with $31.4 million, or 7.4% of service revenue, in the comparable quarter of the prior year. GAAP net income for the quarter totaled $28.3 million, or $0.49 per diluted share, compared with GAAP net income of $21.3 million, or $0.36 per diluted share for the quarter ended December 31, 2012. GAAP diluted earnings per share grew 36.1% year-over-year.

The financial results of the December quarter in the current and prior year period each included special items, as detailed in the financial charts within this press release. Excluding the impact of special items, adjusted operating income in the second quarter of Fiscal Year 2014 was $47.7 million, or 9.8% of service revenue. Excluding the impact of special items, adjusted operating income in the second quarter of Fiscal Year 2013 was $32.1 million, or 7.6% of service revenue. Excluding the impact of special items, adjusted net income was $29.1 million, or $0.51 per diluted share in the quarter ended December 31, 2013, and was $24.5 million, or $0.41 per diluted share in the quarter ended December 31, 2012. Adjusted earnings per share grew 24.4% year-over-year.

On a segment basis, service revenue for the second quarter of Fiscal Year 2014 was $363.9 million in Clinical Research Services (CRS), $55.5 million in PAREXEL Consulting and Medical Communications Services (PCMS), and $67.7 million in Perceptive Informatics, Inc.

For the six months ended December 31, 2013, consolidated service revenue was $936.4 million versus $816.8 million in the prior year period, an increase of 14.6%. GAAP operating income for the current six-month period was $88.5 million, or 9.5% of service revenue, compared with GAAP operating income of $61.2 million, or 7.5% of service revenue in the prior year period. GAAP net income for the six months ended December 31, 2013 was $54.3 million, or $0.95 per diluted share, compared with GAAP net income of $36.4 million, or $0.60 per diluted share, in the prior year period. Excluding the impact of special items as detailed in the attached financial charts in both six month periods, operating income was $89.7 million or 9.6% of consolidated service revenue for the six months ended on December 31, 2013, compared with $61.9 million or 7.6% of consolidated service revenue for the six months ended on December 31, 2012. On an adjusted basis, net income for the six months ended December 31, 2013 was $55.0 million, or $0.96 per diluted share, compared with $42.0 million or $0.69 per diluted share in the comparable prior year six month period.

Backlog at the end of December 2013 was $4.81 billion, an increase of 5.9% year-over-year. The reported backlog included gross new business wins in the quarter of $836.1 million, cancellations of $181.4 million, and a positive impact from foreign exchange rates of $11.1 million. The net book-to-bill ratio was 1.34 in the quarter.

The Company issued forward-looking guidance for the third quarter of Fiscal Year 2014 (ending March 31, 2014) and updated guidance for Fiscal Year 2014 as described in the text and chart below. The guidance takes into account a number of factors, including recent exchange rates, tax rates, and the Company's updated overall outlook.

The Company's guidance is:


                         Guidance Issued 1/29/14 Guidance Issued 1/13/14
                         ----------------------- -----------------------

    Q3 FY 2014 Revenue       $490 - $495 million                     N/A

    Q3 FY 2014 GAAP EPS            $0.52 - $0.54                     N/A


    FY 2014 Revenue      $1.920 - $1.930 billion $1.895 - $1.925 billion

    FY 2014 GAAP EPS               $1.99 - $2.09           $1.97 - $2.11

    FY 2014 Non-GAAP EPS           $2.01 - $2.11           $1.97 - $2.11
    --------------------           -------------           -------------

In addition to the financial measures prepared in accordance with GAAP, the Company uses certain non-GAAP financial measures. The Company believes that presenting the non-GAAP financial measures contained in this press release assists investors and others in gaining a better understanding of its core operating results and future prospects, especially when comparing such results to previous periods or forecasted guidance, because such measures exclude items that are outside of the Company's normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. Management uses non-GAAP financial measures, in addition to the measures prepared in accordance with GAAP, as the basis for measuring the Company's core operating performance and comparing such performance to that of prior periods and to the performance of its competitors for the same reasons stated above. Such measures are also used by management in its financial and operating decision-making. Non-GAAP financial measures are not meant to be considered superior to or a substitute for the Company's results of operations prepared in accordance with GAAP.

A conference call to discuss PAREXEL's Second Quarter Fiscal Year 2014 earnings, business, and financial outlook will begin at 10:00 a.m. ET on Thursday, January 30, 2014 and will be broadcast live over the internet via webcast. The webcast may be accessed in the "Upcoming Events" portion of the main page of the Investor Relations section of the Company's website at www.PAREXEL.com. Users should follow the instructions provided to assure that the necessary audio applications are downloaded and installed. A replay of this webcast will be archived on the website approximately two hours after the call and will continue to be accessible for approximately one year following the live event. To participate via telephone, dial +1 (408) 940-3886 and ask to join the PAREXEL International Second Quarter Fiscal Year 2014 earnings conference call.

The company has enhanced the supplemental financial information that it provides on its website in conjunction with earnings. A presentation of Second Quarter Fiscal Year 2014 results, as well as certain trended financial information, may be found in the Investor Relations section of the Company's website under the "Additional Financials" section.

About PAREXEL International

PAREXEL International Corporation is a leading global biopharmaceutical services organization, providing a broad range of knowledge-based contract research, consulting, medical communications, and technology solutions and services to the worldwide pharmaceutical, biotechnology and medical device industries. Committed to providing solutions that expedite time-to-market and peak-market penetration, PAREXEL has developed significant expertise across the development and commercialization continuum, from drug development and regulatory consulting to clinical pharmacology, clinical trials management, medical education and reimbursement. Perceptive Informatics, Inc., a subsidiary of PAREXEL, provides advanced technology solutions, including medical imaging, to facilitate the clinical development process. Headquartered near Boston, Massachusetts, PAREXEL operates in 76 locations in 50 countries around the world, and has approximately 15,100 employees. For more information about PAREXEL International visit www.PAREXEL.com.

PAREXEL, Perceptive Informatics, LIQUENT, and HERON are registered trademarks of PAREXEL International Corporation or its affiliates.

This release contains "forward-looking" statements regarding future results and events, including, without limitation, statements regarding expected financial results, future growth and customer demand. For this purpose, any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "intends," "appears," "estimates," "projects," "will," "would," "could," "should," "targets," and similar expressions are also intended to identify forward-looking statements. The forward-looking statements in this release involve a number of risks and uncertainties. The Company's actual future results may differ significantly from the results discussed in the forward-looking statements contained in this release. Important factors that might cause such a difference include, but are not limited to, risks associated with: actual operating performance; actual expense savings and other operating improvements resulting from recent and anticipated restructurings; the loss, modification, or delay of contracts which would, among other things, adversely impact the Company's recognition of revenue included in backlog; the Company's dependence on certain industries and clients; the Company's ability to win new business, manage growth and costs, and attract and retain employees; the Company's ability to complete additional acquisitions, and to integrate newly acquired businesses including the recent acquisitions of LIQUENT, Inc. and HERON, Inc., or enter into new lines of business; the impact on the Company's business of government regulation of the drug, medical device and biotechnology industry; consolidation within the pharmaceutical industry and competition within the biopharmaceutical services industry; the potential for significant liability to clients and third parties; the potential adverse impact of health care reform; and the effects of exchange rate fluctuations and other international economic, political, and other risks. Such factors and others are discussed more fully in the section entitled "Risk Factors" of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 as filed with the SEC on November 4, 2013, which "Risk Factors" discussion is incorporated by reference in this press release. The Company specifically disclaims any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing the Company's estimates or views as of any date subsequent to the date of this press release.


                                                                                                              PAREXEL International Corporation

                                                                                                        Consolidated Condensed Statement of Operations

                                                                                                                         (Unaudited)



                                                                         Three Months Ended                                            Six Months Ended

                                   (in thousands, except per share data)  December 31, 2013                                            December 31, 2012             December 31, 2013             December 31, 2012
                                                                          -----------------                                            -----------------             -----------------             -----------------


    Service revenue                                                                           $487,145                                                     $422,068                      $936,390                    $816,821

    Reimbursement revenue                                                                       87,091                                                       61,069                       166,910                     128,836
                                                                                                ------                                                       ------                       -------                     -------

      Total revenue                                                                            574,236                                                      483,137                     1,103,300                     945,657


    Costs and expenses:

    Direct costs                                                                               324,507                                                      301,325                       627,701                     580,729

    Reimbursable out-of-pocket expenses                                                         87,091                                                       61,069                       166,910                     128,836

    Selling, general and administrative                                                         95,528                                                       71,909                       180,440                     141,937

    Depreciation                                                                                16,584                                                       15,462                        32,046                      30,257

    Amortization                                                                                 3,862                                                        2,043                         7,658                       3,127

    Restructuring benefit                                                                            -                                                         (108)                            -                        (418)
                                                                                                   ---                                                         ----                           ---                        ----

     Total costs and expenses                                                                  527,572                                                      451,700                     1,014,755                     884,468


    Income from operations                                                                      46,664                                                       31,437                        88,545                      61,189


    Other expense, net                                                                          (3,707)                                                        (209)                       (6,672)                     (2,597)


    Income before income taxes                                                                  42,957                                                       31,228                        81,873                      58,592


    Provision for income taxes                                                                  14,628                                                        9,885                        27,590                      22,185

    Effective tax rate                                                                            34.1%                                                        31.7%                         33.7%                       37.9%


    Net income                                                                                 $28,329                                                      $21,343                       $54,283                     $36,407
                                                                                               =======                                                      =======                       =======                     =======


    Earnings per common share:
    --------------------------

      Basic                                                                                      $0.50                                                        $0.36                         $0.96                       $0.61

      Diluted                                                                                    $0.49                                                        $0.36                         $0.95                       $0.60


    Shares used in computing earnings per common share:
    ---------------------------------------------------

      Basic                                                                                     56,517                                                       58,671                        56,386                      59,391

      Diluted                                                                                   57,395                                                       59,639                        57,395                      60,412



    Balance Sheet Information                                                Preliminary
    -------------------------

                                                                          December 31, 2013                                            December 31, 2012               June 30, 2013
                                                                          -----------------                                            -----------------               -------------

    Billed accounts receivable, net                                                           $503,578                                                     $411,310                      $457,155

    Unbilled accounts receivable, net                                                          234,740                                                      234,483                       248,219

    Deferred revenue                                                                          (461,029)                                                    (390,705)                     (408,336)

    Net receivables                                                                           $277,289                                                     $255,088                      $297,038
                                                                                              ========                                                     ========                      ========


    Cash and marketable securities                                                            $314,294                                                     $296,545                      $274,164

    Working capital                                                                           $433,461                                                     $325,685                      $403,229

    Total assets                                                                            $1,877,789                                                   $1,697,650                    $1,779,624

    Short-term borrowings                                                                      $13,968                                                     $107,403                       $20,399

    Long-term debt                                                                            $372,500                                                     $277,600                      $427,500

    Stockholders' equity                                                                      $627,874                                                     $580,750                      $538,946


                                                                                                                                                                                    PAREXEL International Corporation

                                                                                                                                                                                    Reconciliation of Non-GAAP Measures

                                                                                                                                                                                            Certain Line Items

                                                                                                                                                                                               (Unaudited)



                                                                                                                           Three Months Ended                                                               Three Months Ended

    (in thousands, except per share data)                                                                                  December 31, 2013                                                                December 31, 2012
                                                                                                                           -----------------                                                                -----------------

                                                                                                                            GAAP                                        Adjustments                                       Non-GAAP            GAAP           Adjustments              Non-GAAP

                                                                                                                           Measure                                                                                        Measure           Measure                                   Measure
                                                                                                                           -------                                                                                        -------           -------                                   -------


    Selling, general and administrative                                                                                                    $95,528                                  $(1,071) (a)                                   $94,457          $71,909                $(807) (c)          $71,102


    Restructuring benefit                                                                                                  $                     -                          $             -                                 $            -            $(108)                $108  (d)   $            -


    Income from operations                                                                                                                 $46,664                                   $1,071                                        $47,735          $31,437                 $699               $32,136


    Other expense, net                                                                                                                     $(3,707)                         $             -                                        $(3,707)           $(209)    $              -                 $(209)


    Income before income taxes                                                                                                             $42,957                                   $1,071                                        $44,028          $31,228                 $699               $31,927


    Provision for income taxes                                                                                                             $14,628                                     $270  (b)                                   $14,898           $9,885              $(2,458) (e)           $7,427


    Net income                                                                                                                             $28,329                                     $801                                        $29,130          $21,343               $3,157               $24,500


    Diluted earnings per common share                                                                                                        $0.49                                    $0.02                                          $0.51            $0.36                $0.05                 $0.41


    Effective tax rate                                                                                                                        34.1%                                                                                   33.8%            31.7%                                      23.3%



    (a) Adjustment includes $1.1 million of legal settlements and acquisition & integration related charges

    (b) Tax associated with item (a)

    (c) Adjustment includes $0.8 million of legal settlements and acquisition & integration related charges

    (d) Adjustment to facility-related charges of $0.1 million related to restructuring plans

    (e) Tax associated with items (c) and (d), and a net $2.7 million expense due to changes in interest, penalties and a valuation allowance in a foreign jurisdiction


                                                                                                                                                                                           PAREXEL International Corporation

                                                                                                                                                                                           Reconciliation of Non-GAAP Measures

                                                                                                                                                                                                  Certain Line Items

                                                                                                                                                                                                      (Unaudited)



                                                                                                                        Six Months Ended                                                                        Six Months Ended

    (in thousands, except per share data)                                                                               December 31, 2013                                                                      December 31, 2012
                                                                                                                        -----------------                                                                      -----------------

                                                                                                                         GAAP                                          Adjustments                                           Non-GAAP                              GAAP            Adjustments              Non-GAAP

                                                                                                                       Measure                                                                                               Measure                             Measure                                    Measure
                                                                                                                       -------                                                                                               -------                             -------                                    -------


    Selling, general and administrative                                                                                            $180,440                                            $(1,151) (a)                                        $179,289                      $141,937              $(1,157) (c)          $140,780


    Restructuring benefit                                                                                                 $               -                                $                 -                                  $                 -                         $(418)                $418  (d)   $             -


    Income from operations                                                                                                          $88,545                                             $1,151                                              $89,696                       $61,189                 $739                $61,928


    Other expense, net                                                                                                              $(6,672)                               $                 -                                              $(6,672)                      $(2,597)               $(395) (e)           $(2,992)


    Income before income taxes                                                                                                      $81,873                                             $1,151                                              $83,024                       $58,592                 $344                $58,936


    Provision for income taxes                                                                                                      $27,590                                               $474  (b)                                         $28,064                       $22,185              $(5,232) (f)           $16,953


    Net income                                                                                                                      $54,283                                               $677                                              $54,960                       $36,407               $5,576                $41,983


    Diluted earnings per common share                                                                                                 $0.95                                              $0.01                                                $0.96                         $0.60                $0.09                  $0.69


    Effective tax rate                                                                                                                 33.7%                                                                                                   33.8%                         37.9%                                       28.8%




    (a) Adjustments include $1.5 million of legal settlements and acquisition & integration related charges, partially offset by $0.3 million gain related to the revaluation of HERON earn-out contingent consideration liability

    (b) Tax associated with item (a)

    (c)  Adjustment includes $1.2 million of legal settlements and acquisition & integration related charges

    (d) Adjustment to facility-related charges of $0.4 million related to restructuring plans

    (e)  Gain on facility sale previously impaired

    (f) Tax associated with items (c) through (e), a tax expense for one-time adjustments to deferred tax assets in Q1 FY13, and a net $2.7 million expense due to changes in interest, penalties and a valuation allowance in a foreign jurisdiction in Q2 FY13


                                                PAREXEL International Corporation

                                                       Segment Information

                                                           (Unaudited)



                                                                                Three Months Ended           Three Months Ended

    (in thousands)                                                               December 31, 2013            December 31, 2012
                                                                                 -----------------            -----------------


    Clinical Research Services (CRS)


    Service revenue                                                                                $363,867                     $320,580

    % of total service revenue                                                                         74.7%                        76.0%

    Gross profit                                                                                   $108,636                      $78,165

    Gross margin % of service revenue                                                                  29.9%                        24.4%


    PAREXEL Consulting & Medical Communications

      Services (PCMS)


    Service revenue                                                                                 $55,532                      $49,274

    % of total service revenue                                                                         11.4%                        11.7%

    Gross profit                                                                                    $22,309                      $20,820

    Gross margin % of service revenue                                                                  40.2%                        42.3%



    Perceptive Informatics (PI)


    Service revenue                                                                                 $67,746                      $52,214

    % of total service revenue                                                                         13.9%                        12.3%

    Gross profit                                                                                    $31,693                      $21,758

    Gross margin % of service revenue                                                                  46.8%                        41.7%



    Total service revenue                                                                          $487,145                     $422,068

    Total gross profit                                                                             $162,638                     $120,743

    Gross margin % of service revenue                                                                  33.4%                        28.6%



    Revenue by Geography
    --------------------


    The Americas                                                                                   $240,888                     $210,065

    Europe, Middle East & Africa                                                                    180,705                      150,109

    Asia/Pacific                                                                                     65,552                       61,894

    Total service revenue                                                                          $487,145                     $422,068
                                                                                                   ========                     ========



    Quarterly Supplemental Financial Data
    -------------------------------------


    Service revenue                                                                                $487,145                     $422,068

    Reimbursement revenue                                                                            87,091                       61,069

    Investigator fees                                                                               133,212                       96,307

    Gross revenue                                                                                  $707,448                     $579,444
                                                                                                   ========                     ========


    Days sales outstanding                                                                               36                           41


    Capital expenditures                                                                            $19,828                      $19,849


                                                PAREXEL International Corporation

                                                       Segment Information

                                                           (Unaudited)



                                                                                   Six Months Ended      Six Months Ended

    (in thousands)                                                                December 31, 2013      December 31, 2012
                                                                                  -----------------      -----------------


    Clinical Research Services (CRS)


    Service revenue                                                                            $696,459                    $617,747

    % of total service revenue                                                                     74.4%                       75.6%

    Gross profit                                                                               $203,040                    $155,166

    Gross margin % of service revenue                                                              29.2%                       25.1%


    PAREXEL Consulting & Medical Communications

      Services (PCMS)


    Service revenue                                                                            $109,069                     $97,625

    % of total service revenue                                                                     11.6%                       12.0%

    Gross profit                                                                                $44,580                     $39,486

    Gross margin % of service revenue                                                              40.9%                       40.4%



    Perceptive Informatics (PI)


    Service revenue                                                                            $130,862                    $101,449

    % of total service revenue                                                                     14.0%                       12.4%

    Gross profit                                                                                $61,069                     $41,440

    Gross margin % of service revenue                                                              46.7%                       40.8%



    Total service revenue                                                                      $936,390                    $816,821

    Total gross profit                                                                         $308,689                    $236,092

    Gross margin % of service revenue                                                              33.0%                       28.9%



    Revenue by Geography
    --------------------


    The Americas                                                                               $465,298                    $407,479

    Europe, Middle East & Africa                                                                339,219                     288,378

    Asia/Pacific                                                                                131,873                     120,964

    Total service revenue                                                                      $936,390                    $816,821
                                                                                               ========                    ========


    CONTACTS:                            Ingo Bank, Senior Vice
                                         President and Chief
                                         Financial Officer

                                         Jill Baker, Corporate Vice
                                         President of Investor
                                         Relations

                                        +1-781-434-4118

SOURCE PAREXEL International Corporation