Parexel (PRXL) Updates on Strategy, Growth Expectations for FY16 - 17; Trims GAAP Outlook

PAREXEL International Corporation (Nasdaq: PRXL) presents its strategy for growth and its expectations for Fiscal Years 2016 and 2017 performance to investors and analysts at an Investor Day in New York City.

Josef H. von Rickenbach, PAREXEL’s Chairman and Chief Executive Officer, provides an overview of Company performance, industry dynamics, and the Company’s strategy. Mr. von Rickenbach states that PAREXEL’s strategy is to enhance its leadership in the biopharmaceutical services industry by focusing on its core business and capturing new growth from adjacent markets. The Company reiterates its long-term financial goals, including:

• 10–12% annual revenue growth, consisting of 7–8% growth from ongoing operations and 3–4% growth from acquisitions
• 100–120 basis points of annual adjusted operating margin improvement, with the long-term goal of an adjusted operating margin range of 14–16%
• 15–20% annual adjusted diluted EPS growth

In discussing industry trends, Mr. von Rickenbach says, “Several paradigm shifts in the biopharmaceutical marketplace—changing biopharmaceutical pipelines, the increasing importance of payers, advances in information technology, and virtualization of biopharmaceutical companies—provide us with major new market opportunities. Our strategy extends our competencies into new markets, including market access and commercialization, that are large and growing faster than our traditional clinical business.”

Mark A. Goldberg, President and Chief Operating Officer, describes plans for executing the Company’s strategy. PAREXEL will grow the core business by leveraging strategic partnerships and enhancing service offerings to small and midsized companies. Operations in Asia are expected to produce strong growth. Dr. Goldberg describes the differentiated capabilities of PAREXEL Informatics. He outlines continuing and new initiatives to improve profitability. Joshua Schultz, Corporate Vice President, provides an expanded discussion of the capabilities and strategy of the Company’s recently launched PAREXEL Access, which offers an integrated suite of post-approval clinical services, market access consulting, medical communications, and pharmacovigilance.

Ingo Bank, Senior Vice President and Chief Financial Officer, presents a financial overview. Mr. Bank discusses the drivers of past and future revenue performance of the Company and its segments. He describes the results of the Company’s margin improvement initiatives, including the successful Margin Acceleration Program (MAP), and details of future margin improvement efforts.

Mr. Bank comments, “In recent years, we have seen strong growth in new business and backlog but also a delay in converting backlog into revenue. This has been caused by a trend toward smaller, more complex clinical trials, particularly those in oncology, which take longer to start and complete. We expect this trend to continue in Fiscal Year 2017, when we project revenue growth of 4–5.5%, with year-over-year growth rates likely to improve throughout the year. We believe that during the latter part of Fiscal Year 2017, the prolongation of trials will have reached steady state, at which point revenue growth should start to align more closely with backlog growth. The long-term driver of our revenue growth expectations remains our encouraging new business performance.”

Mr. Bank’s presentation provides financial guidance for the fourth quarter of Fiscal Year 2016 (ending June 30, 2016) and for full Fiscal Years 2016 and 2017, as summarized below:

* Projected growth of 10–18% in adjusted diluted EPS for Fiscal Year 2017 is based on the midpoint of guidance for adjusted diluted EPS for Fiscal Year 2016. Please see the GAAP to Non-GAAP reconciliation table later in this release.

**Adjusted diluted EPS guidance for Q4 FY 2016 excludes expected Q4 Fiscal Year 2016 restructuring charges related to our Margin Acceleration Program (MAP) as well as acquisition-related charges. In addition, adjusted diluted EPS guidance for the full Fiscal Year 2016 excludes the impact of certain items that were recorded in the first nine months, as detailed in a chart contained within this release. The MAP is now expected to achieve the high end of its pretax savings targets of $20–$30 million in Fiscal Year 2016. Total charges relating to the MAP are expected to be $47–$52 million, including $4-$9 million in the fourth quarter of Fiscal Year 2016.

Those who wish to listen to the Company’s Investor Day presentations today and to view the accompanying slides should log onto the Company’s website at www.PAREXEL.com and click on the PAREXEL International 2016 Investor Day link under the “Upcoming Events” section at the bottom of the Investors homepage at least 15 minutes prior to the event’s broadcast, which will start at 9:00 a.m. ET. Users should follow the instructions provided to assure that the necessary audio applications are downloaded and installed. In addition, an archived version of the event’s presentations may be found in the Investor Relations section of PAREXEL’s website.

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 should not be considered superior to nor a substitute for the Company’s results of operations prepared in accordance with GAAP.

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