Quintiles Transnational Holdings Inc. has reported its financial results for the quarter and year ended December 31, 2015.
For the three months ended December 31, 2015, the Company’s service revenues were $1.13 billion which represents growth of 6.1%, or $64.6 million, including an unfavorable foreign currency impact of $35.5 million compared to the same period last year. The Company’s growth in service revenues, excluding the impact of foreign currency fluctuations (“constant currency”), was 9.4% with 12.1% growth in the Product Development segment and 2.2% growth in the Integrated Healthcare Services segment.
Adjusted income from operations was $187.7 million in the fourth quarter of 2015, representing growth of 14.3% compared to the same period last year. The adjusted income from operations margin was 16.6%, representing 120 basis points of expansion compared to the same period last year and including 140 basis points of favorable currency fluctuations. Adjusted net income was $111.4 million in the fourth quarter of 2015, representing growth of 21.3% compared to the same period last year. Diluted adjusted earnings per share was $0.90 in the fourth quarter of 2015, representing growth of 26.8% compared to the same period last year.
Reported GAAP income from operations was $178.0 million, reported GAAP net income attributable to Quintiles was $104.6 million, and reported GAAP diluted earnings per share was $0.85 for the three months ended December 31, 2015. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, including adjusted income from operations, adjusted net income, and diluted adjusted earnings per share, are attached to this press release.
For the year ended December 31, 2015, the Company’s service revenue growth was 3.9%, or $160.6 million, including an unfavorable foreign currency impact of $212.3 million compared to 2014. At constant currency, the Company’s service revenues grew 9.0% with 7.2% growth in the Product Development segment and 14.0% growth in the Integrated Healthcare Services segment. Adjusted income from operations for the year ended December 31, 2015 was $679.8 million, representing growth of 13.4% and 130 basis points of margin expansion compared to the same period last year, resulting from a constant currency improvement in Integrated Healthcare Services and the benefit of 130 basis points of favorable currency fluctuations across the Company. Adjusted net income was $418.9 million for the year ended December 31, 2015, representing growth of 18.5% compared to the same period last year. Diluted adjusted earnings per share was $3.33 for the year ended December 31, 2015, representing growth of 23.3% compared to 2014. Reported GAAP income from operations was $646.6 million, reported GAAP net income attributable to Quintiles was $387.2 million and reported GAAP diluted earnings per share was $3.08 for the year ended December 31, 2015.
Net new business of $1.49 billion was recorded for the fourth quarter, representing a book-to-bill ratio of 1.32. For the year ended December 31, 2015, net new business totaled $5.32 billion, representing a book-to-bill ratio of 1.23. The fourth quarter net new business contributed to an ending backlog of $12.04 billion at December 31, 2015.
“We are pleased to have achieved another year of consistent growth in 2015, having delivered 9.0% constant currency revenue growth, 23.3% diluted adjusted earnings per share growth, and a consolidated book-to-bill of 1.23,” said Quintiles Chief Executive Officer Tom Pike. “As expected, our Product Development segment delivered a strong fourth quarter, with 12.1% constant currency revenue growth and a 1.30 book-to-bill ratio. We believe we are well-positioned for the long-term with our $12.04 billion of backlog.”
The Product Development segment net new business totaled $1.10 billion in the quarter ended December 31, 2015, which translates to a book-to-bill ratio of 1.30. Product Development’s service revenues at constant currency grew 12.1%, or $93.7 million, during the fourth quarter of 2015 compared to the same period last year. At actual foreign exchange rates, Product Development service revenues were negatively impacted by $22.4 million of unfavorable foreign currency fluctuations, resulting in service revenue growth of 9.2% compared to the same period last year. The constant currency revenue growth resulted from Q2 Solutions and volume-related increases in core clinical services, clinical solutions provided on a functional resourcing basis, and clinical trial support services. Product Development’s income from operations margin was 23.7% for the fourth quarter, representing an improvement of 200 basis points compared to the same period last year, including a benefit of 190 basis points from favorable currency fluctuations.
The Integrated Healthcare Services segment net new business totaled $390 million in the quarter ended December 31, 2015, which translates to a book-to-bill ratio of 1.38. On a constant currency basis, Integrated Healthcare Services’ service revenues increased 2.2%, or $6.4 million, during the fourth quarter of 2015 compared to the same period last year. At actual foreign exchange rates, Integrated Healthcare Services’ service revenues declined 2.3% to $282.9 million, negatively impacted by $13.1 million from unfavorable foreign currency fluctuations. The constant currency revenue growth resulted from increases in real-world and late phase research services, offset by a decline in commercial services in North America due to cancellations, and a decline in Europe due primarily to the conclusion of an agreement to distribute pharmaceutical products in Italy in the fourth quarter of 2014. Integrated Healthcare Services’ income from operations margin was 8.2% for the fourth quarter, representing a decline of 20 basis points compared to the same period last year, due to lower margins in commercial services in North America and Japan, offset by higher margins in real world and late phase research.
General corporate and unallocated expenses were $35.4 million during the quarter ended December 31, 2015 compared to $28.2 million for the same period last year. Interest expense was $25.5 million during the quarter ended December 31, 2015 compared to $26.0 million for the same period last year.
The GAAP effective income tax rate was 32.1% for the fourth quarter of 2015 compared to 29.4% for the same period in 2014 and 29.5% for the full year ended December 31, 2015 compared to 29.9% for 2014.
Equity in earnings of unconsolidated affiliates was $0.3 million during the fourth quarter of 2015 compared to equity in losses of unconsolidated affiliates of $5.4 million for the same period last year.
Net income attributable to noncontrolling interests was $3.5 million during the quarter ended December 31, 2015, primarily due to the minority interest partner’s share in Q2 Solutions. There was no material net income attributable to noncontrolling interests in the same period last year.
The Company repurchased approximately 4.0 million shares of its common stock in the fourth quarter of 2015 for $265.0 million, and has approximately $144.5 million remaining under its repurchase authorization. The share repurchase program does not obligate the Company to acquire any particular amount of common stock, has no end date, and may be modified, suspended, or discontinued at any time.
Financial Guidance
For 2016, the Company expects to achieve service revenue constant currency growth between 7.0% and 8.5% compared to full year 2015, and diluted adjusted earnings per share of $3.70 to $3.85 per share, representing growth of 11.1% to 15.6% with diluted GAAP earnings per share between $3.52 and $3.70 per share, and an annual effective income tax rate estimated at approximately 29.0%. This financial guidance assumes January foreign currency exchange rates remain in effect for the remainder of the year and does not reflect the potential impact of any future equity repurchases.