Quintiles Transnational Holdings Inc. (Q)
Q2 2013 Earnings Conference Call
August 01, 2013 8:00 am ET
Tom Pike - Chief Executive Officer
Kevin Gordon - Chief Financial Officer
Karl Deonanan - Investor Relations
Ricky Goldwasser - Morgan Stanley
Doug Tsao - Barclays
John Kreger - William Blair
Dave Windley - Jefferies
Tycho Peterson - JPMorgan
Robert Jones - Goldman Sachs
Greg Bolan - Sterne Agee
Tim Evans - Wells Fargo Securities
Rafael Tejada - Bank of America
Darren Lehrich - Deutsche Bank
Sean Wieland - Piper Jaffray
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Thank you. Good morning everyone and welcome to Quintiles' second quarter 2013 earnings call. With me today are Tom Pike, our Chief Executive Officer, and Kevin Gordon, our Chief Financial Officer. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statement due to risks and uncertainties associated with the Company's business. These are discussed in the Company's filings with the Securities and Exchange Commission including the filed prospective dated May 8, 2013 relating to the Company's initial public offering.
In addition, please note that we will discuss certain non-GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation currently posted on the Company's website at www.quintiles.com within the Investor Relations section.
I would now like to turn the call over to our CEO, Tom Pike.
Thank you, Karl. Good morning to everyone. I'd like to thank you for joining our first earnings call as a public company. As you know, quintiles has a long track record of success. During the past decade, we've established ourselves as the world's leading provider of biopharmaceutical development services and commercial outsourcing services. We're pleased with our results for the second quarter which confirms that our strategy and the diversity of our business continue to differentiate Quintiles in the marketplace and that our focus on operational delivery excellence has enabled us to drive profitable growth. Our results were in line with our expectations for the quarter and were achieved at the same time as our team committed considerable time and energy to our IPO.
Now let's begin with the presentation on Slide 3 and a few highlights. Net new business overall has grown 13% in the second quarter of 2013 and 16% on a year-to-date basis. This is our fourth sequential quarter of $1 billion or more in net new business which has contributed to a healthy ending backlog of $9 billion positioning us well for the future. The year-to-date book to bill ratio is 1.21 and for the second quarter, the book to bill ratio is 1.07 overall.
Now on the Product Development side of the house, we continue to see strong demand in the marketplace across the spectrum of our customers which include the large, midsized and small pharma including biotech. We've seen increased RFP volume through this year resulting in 22% growth in net new business in this segment through the first half. In this quarter, net new business in Product Development grew 17% to $871.4 million reflecting a book to bill of 1.2 for the quarter and 1.36 year-to-date. We've experienced relatively strong net new business across majority of our service lines in Product Development including our core clinical business lines and our global labs.
Now as the largest product development service provider with our comprehensive service offering, we recorded many significant wins this year. Importantly, we're also seeing what we believe are the beginnings of an evolution in the strategic partnering model. For instance one I will highlight is the announcement in May of the unique partnership where we are able to provide the full range of our capabilities to make drug development more efficient and unlock the knowledge and insights of both Quintiles and our customer. In this customer scenario, we will fully utilize all of our capabilities and combine them with the best of our customers' practices. This is a truly strategic partnership and we have the capacity for more partnerships like this.
Within our Integrated Healthcare segment, we have promising new business demand and revenue growth in the observational research business. However, we've experienced the slower sales environment within commercial services businesses including in the timing of award decisions. This slowing coupled with cancellations and scope modifications in commercial services contracts, in some commercial services contracts, and these took place primarily in North America and Japan, resulted in a net new business of $142.2 million and a book to bill for IHS of 0.65 for the second quarter and 0.71 year-to-date.
However, I am happy to announce that one opportunity which slipped from the second quarter was finalized just after the quarter closed. This opportunity, which was about $100 million sale, brings our book to bill ratio in IHS in line with historical rates. I would also note that in this segment, a different but attractive demand is occurring for an integrated suite of our services. The sales here are lumpy but the medium-term backdrop is promising.