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ICON Reports Fourth Quarter and Full Year 2017 Results

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Highlights

  • Quarter 4 gross business wins of $718 million, a gross book to bill of
    1.58. Net business wins of $599 million, a net book to bill of 1.32.
    Full year gross business wins of $2.6 billion, a gross book to bill of
    1.50, net business wins of $2.3 billion, a net book to bill of 1.29.
  • Backlog of business grew 16.9% year on year to $4.93 billion.
  • Quarter 4 net revenue increased 4.6% year on year to $455 million.
    Full year net revenue increased 5.5% to $1,758 million.
  • Quarter 4 top customer revenue concentration reduced to 13.2% from
    23.8% in quarter 4 2016. In the quarter revenue outside our top
    customer, increased by 19.2% year over year.
  • Quarter 4 income from operations increased 6.0% year on year to $89.7
    million, or 19.7% of revenue. Full year 2017 income from operations
    increased by 8.2% to $346.1 million.
  • Earnings per share for quarter 4 of $1.43, a 7.5% increase year on
    year. 2017 earnings per share on a pro forma full year basis were
    $5.39, an increase of 13.0% on 2016.
  • Full year 2018 guidance updated to take account of ASC 606. Revenue to
    be in the range of $2,520 -$2,640 million. Earnings per share guidance
    unchanged in the range of $5.89 - $6.09 representing an increase of
    9.3% – 13.0%.

ICON
plc
(NASDAQ:ICLR),
a global provider of drug development solutions and
services to the pharmaceutical, biotechnology and medical device
industries, today reported its financial results for the fourth quarter
and full year ended December 31, 2017.

CEO Dr. Steve Cutler commented, "2017 was another strong year for
ICON. Positive business win trends across all customer segments have
diversified our business, resulting in backlog growth of 17% year on
year and reducing our top customer concentration to 13% in quarter
4 from 24% in the same quarter last year. Full year revenues grew 5.5%
to $1.758 billion, and our proactive cost management has enabled us to
expand our operating margin to 19.7%.  As a result we have grown EPS 13%
year on year to $5.39. We expect 2018 to be another robust year of
revenue and earnings growth and in accordance with the new accounting
standard we are updating our revenue guidance to a range of $2,520 -
$2,640 million. Earnings per share guidance remains in the range of
$5.89 - $6.09 representing an increase of 9.3% – 13.0%."

Fourth Quarter 2017 Results

The positive business environment was reflected in the gross business
wins in the fourth quarter of $718 million and cancellations in the
quarter were $119 million, resulting in net business wins of $599
million and a net book to bill of 1.32.

In the fourth quarter net revenue grew 4.6% year on year to $455 million
from $435 million in the same quarter last year. This represented 2.3%
constant currency growth with revenue outside of our top customer
growing 19.2% year over year. Concentration levels of ICON's largest
customer significantly reduced from 23.8% of revenue last year to 13.2%
this quarter. This customer now represents 11% of ICON's backlog down
from 15% last year.

An efficient operational model drove income from operations in the
quarter up by 6.0% to $89.7 million, or 19.7% of revenue, compared to
$84.6 million or 19.5% for the same quarter last year.

Net income in the quarter increased by 5.7% to $78.5 million on a
non-GAAP basis compared with $74.3 million in the same quarter last
year. This was helped by our industry leading underlying effective tax
rate of 12% and global business support model that brought SG&A costs
down to 18.0% of revenue.

Earnings per share increased to $1.43 per share on a diluted non-GAAP
basis, from $1.33 per share for the same quarter last year, an increase
of 7.5% reflecting a strong quarter for ICON.

We continued our share repurchase program in the quarter buying $25
million worth of stock at an average price of $113.08 per share.

The Company recorded a non-recurring tax expense of $7.4 million during
the quarter, principally as a result of the mandatory repatriation
provisions contained in the Tax Cuts and Jobs Act enacted during the
fourth quarter of 2017. Excluding the non-recurring tax expense the
pro-forma tax rate was 10% for the fourth quarter and 12% for the full
year.

Full Year 2017 Results

Full year gross business wins were $2.6 billion and cancellations were
$0.3 billion, resulting in net business wins of $2.3 billion and a net
book to bill of 1.29. This led to strong backlog growth of 16.9% year on
year.

Full year revenue increased by 5.5% to $1,758 million from $1,666
million in 2016.

Income from operations for 2017, on a non-GAAP basis, increased by 8.2%
to $346 million or 19.7% of revenue compared with $320 million or 19.2%
of revenue in the previous year.

Net income for 2017, on a non-GAAP basis, increased by 9.8% to $296
million compared with $269 million last year.

Earnings per share for 2017, on a non-GAAP basis, increased to $5.39 per
diluted share from $4.77 per diluted share last year, an increase of
13.0%.

Day's sales outstanding, comprising accounts receivable and unbilled
revenue less payments on account, were 49 days at December 31, 2017,
compared with 50 days at the end of September 2017 and 50 days at the
end of December 2016.

Cash generated from operating activities for the quarter was $105.9
million. Capital expenditure for the quarter was $21 million. As a
result, at December 31, 2017, the company had net cash of $11.6 million,
compared to net debt of $56 million at September 30, 2017 and net debt
of $88 million at the end of December 2016.

During the year we repurchased $133 million shares in total at an
average price of $83.76.

In July, ICON acquired the Mapi Group, a leading health outcomes
research and commercialisation company. Integration plans are underway
and progressing well. This combined division has in excess of 1,400
heads, operating throughout ICON's global network and enhances ICON's
key late stage service offerings. The additional scale and capabilities
means that ICON is the world's second largest provider of late phase
services.

As of January 1, 2018 ICON has adopted the new revenue recognition
standard (ASC 606). As a result we are updating our full year 2018
revenue guidance to $2,520 -$2,640 million. Earnings per share guidance
remains unchanged in the range of $5.89 - $6.09 representing an increase
of 9.3% – 13.0%.

In addition to the financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this press release
contains certain non-GAAP financial measures, including non-GAAP
operating and net income and non-GAAP diluted earnings per share. While
non-GAAP financial measures are not superior to or a substitute for the
comparable GAAP measures, ICON believes certain non-GAAP information is
useful to investors for historical comparison purposes.

ICON will hold its fourth quarter conference call today, February 15,
2018 at 09:00 EDT [14:00 Ireland & UK]. This call and linked slide
presentation can be accessed live from our website at http://investor.iconplc.com.
A recording will also be available on the website for 90 days following
the call. In addition, a
calendar of company events
, including upcoming conference
presentations, is available on our website, under "Investors". This
calendar will be updated regularly.

This press release contains forward-looking statements. These statements
are based on management's current expectations and information currently
available, including current economic and industry conditions. These
statements are not guarantees of future performance or actual results,
and actual results, developments and business decisions may differ from
those stated in this press release. The forward-looking statements are
subject to future events, risks, uncertainties and other factors that
could cause actual results to differ materially from those projected in
the statements, including, but not limited to, the ability to enter into
new contracts, maintain client relationships, manage the opening of new
offices and offering of new services, the integration of new business
mergers and acquisitions, as well as economic and global market
conditions and other risks and uncertainties detailed from time to time
in SEC reports filed by ICON, all of which are difficult to predict and
some of which are beyond our control. For these reasons, you should not
place undue reliance on these forward-looking statements when making
investment decisions. The word "expected" and variations of such words
and similar expressions are intended to identify forward-looking
statements. Forward-looking statements are only as of the date they are
made and we do not undertake any obligation to update publicly any
forward-looking statement, either as a result of new information, future
events or otherwise. More information about the risks and uncertainties
relating to these forward-looking statements may be found in SEC reports
filed by ICON, including its Form 20-F, F-1, S-8 and F-3, which are
available on the SEC's website at http://www.sec.gov.

ICON plc is a global provider of drug development solutions and services
to the pharmaceutical, biotechnology and medical device industries. The
company specialises in the strategic development, management and
analysis of programs that support clinical development - from compound
selection to Phase I-IV clinical studies. With headquarters in Dublin,
Ireland, ICON currently, operates from 98 locations in 38 countries and
has approximately 13,250 employees. Further information is available at www.iconplc.com.

 

ICON plc
Consolidated Income Statements (Unaudited)
(Before
restructuring and other items)

 

Three and Twelve Months ended December 31, 2017 and December
31, 2016

(Dollars, in thousands, except share and per
share data)

   
Three Months Ended Twelve Months Ended
 

December
31,
2017

 

December
31,
2016

December
31,
2017

 

December
31,
2016

Revenue:
Gross revenue 636,305 610,465 2,402,321 2,364,956
Reimbursable expenses   (181,166)   (175,331)   (643,882)   (698,469)
 
Net revenue 455,139 435,134 1,758,439 1,666,487
 
Costs and expenses:
Direct costs 267,135 251,502 1,027,310 961,333
Selling, general and administrative expense 82,086 83,534 323,741 325,726
Depreciation and amortization   16,174   15,455   61,297   59,575
 
Total costs and expenses   365,395   350,491   1,412,348   1,346,634
 
Income from operations 89,744 84,643 346,091 319,853
 
Net interest expense   (2,512)   (3,037)   (10,281)   (11,522)
 
Income before provision for income taxes 87,232 81,606 335,810 308,331
 
Provision for income taxes   (8,724)   (7,344)   (40,137)   (39,013)
 
Net income   78,508   74,262   295,673   269,318
 
Net income per Ordinary Share:
 
Basic   $1.45   $1.35   $5.46   $4.87
 
Diluted   $1.43   $1.33   $5.39   $4.77
 
Weighted average number of Ordinary Shares outstanding:
 
Basic   54,187,688   54,930,541   54,129,439   55,248,900
 
Diluted   54,844,232   55,685,863   54,849,046   56,407,136
 

 

Consolidated Income Statements (Unaudited)
(US GAAP)

 

Three and Twelve Months ended December 31, 2017 and December
31, 2016

(Dollars, in thousands, except share and per
share data)

   
Three Months Ended Twelve Months Ended
 

December
31,
2017

 

December
31,
2016

December
31,
2017

 

December
31,
2016

Revenue:
Gross revenue 636,305 610,465 2,402,321 2,364,956
Reimbursable expenses   (181,166)   (175,331)   (643,882)   (698,469)
 
Net revenue 455,139 435,134 1,758,439 1,666,487
 
Costs and expenses:
Direct costs 267,135 251,502 1,027,310 961,333
Selling, general and administrative expense 82,086 83,534 323,741 325,726
Depreciation and amortization 16,174 15,455 61,297 59,575
Restructuring costs   -   -   7,753   8,159
 
Total costs and expenses   365,395   350,491   1,420,101   1,354,793
 
Income from operations 89,744 84,643 338,338 311,694
 
Net interest expense   (2,512)   (3,037)   (10,281)   (11,522)
 
Income before provision for income taxes 87,232 81,606 328,057 300,172

Provision for income taxes

 

(16,124)

 

(7,344)

 

(46,569)

 

(37,993)

 
Net income   71,108   74,262   281,488   262,179
 
Net income per Ordinary Share:
 
Basic   $1.31   $1.35   $5.20   $4.75
 
Diluted   $1.30   $1.33   $5.13   $4.65
 
Weighted average number of Ordinary Shares outstanding:
 
Basic   54,187,688   54,930,541   54,129,439   55,248,900
 
Diluted   54,844,232   55,685,863   54,849,046   56,407,136
 

ICON plc
Summary Balance Sheet Data
December
31, 2017 and December 31, 2016

(Dollars, in thousands)

   

December 31,
2017
(Unaudited)

December 31,
2016
(Audited)

 
 
Cash and short-term investments 360,448 260,587
Debt (348,888) (348,511)
Net (debt)/cash 11,560 (87,924)
 
Accounts receivable 379,501 416,229
Unbilled revenue 268,509 192,687
Payments on account (298,992) (272,757)
Total 349,018 336,159
 
Working Capital 534,960 463,552
 
Total Assets 2,146,618 1,825,843
 
Shareholder's Equity 1,191,000 945,174
 

ICON/ICLR-F

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